The activity of any commercial enterprise is associated with one or another interaction with assets. Based on this, we can say that the effectiveness of this interaction deserves special attention. There are various indicators that in one way or another evaluate effectiveness. However, the simplest and most understandable method, which is directly related to the financial result, profit, is the determination of profitability. It is on how to calculate the return on assets and some related indicators, we will dwell in more detail.
In the general case, to determine profitability, it is necessary to divide the profit indicator by the value of the profitability of which is calculated. Thus, the rate of return on assets will be calculated as profit related to the value of assets. This indicator reflects the efficiency of use of the property (assets) of the company, reflecting the amount of profit that is formed due to each ruble value of this property.
It is worth focusing on exactly which values should be taken into account when calculating the indicator. One of the problems is that there is a fairly large "range" of profit indicators. In the profit and loss statement alone, there are four different amounts of profit! However, the rate of return on assets is a fairly general indicator, therefore, when calculating it, you can use the usual indicator of net profit. In addition, pre-tax profit calculation is permitted . Calculation using this indicator allows you to compare among themselves organizations and enterprises that have differences in tax status.
We pass to the denominator, with which certain difficulties may also arise. They, in turn, are associated with the fact that the indicators of the financial result, that is, profit, and property, that is, assets, are presented in the statements differently. Profit is formed and accumulated over a certain period, but the value of assets is reflected in the balance sheet only for a specific date. This means that during the period their value could change in a certain way, and these changes must be taken into account in order to correctly calculate the return on assets. The most correct decision in this case would be to build a calculation based on the average value of assets for the analyzed period. Less correct, but simpler is the use of property value at the end of the period. Despite the fact that such a calculation is less accurate, it has its own logic: the value at the end of the period has already undergone all the changes.
In addition to determining the profitability of the entire value of the property, it is possible to calculate separately the profitability ratio of current assets and non-current assets. Their calculation is carried out by a similar technique. In other words, the numerator uses the amount of net profit, and the denominator uses the value of current or non-current assets, depending on the calculated indicator. It is obvious that in the case of both indicators, it is also necessary to include in the calculation the average value of the property over the period, so that the profitability is determined more accurately.
The last indicator that we will consider is called the return on investment ratio . It allows you to evaluate the effectiveness of investments in the acquisition of an asset. The calculation of this coefficient is quite different from the previously considered. It is also determined by division, but the values used in the calculation are completely different. In the numerator of the fraction, you must put all the income received from owning the asset. This income is the sum of the profit brought by him and the difference between the purchase and sale price. Then this income must be attributed to the amount that was spent on the acquisition. This indicator can be calculated not only for one specific type of asset, but also for their totality.