|return on assets (ROA)|
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Definition of return on assets (ROA)
return on assets (ROA)
Although there is no single uniform practice for
Return on assets (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months
Part of the return that is not due to systematic influences (market wide influences). In
Goods may be returned to the seller by the purchaser without restrictions.
A method of investment appraisal that measures
the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow
A merger or consolidation in which an acquirer purchases the selling firm's assets.
Money after-tax rate of return minus the inflation rate.
The fund return, for any 12-month period, including changes in unit value and the reinvestment of distributions, but not taking into account sales, redemption, distribution or other optional charges or income taxes payable by any unitholder that would reduce returns.
The annual rate of return that when compounded t times, would have
Arithmetic mean return.
An average of the subperiod returns, calculated by summing the subperiod returns
A firm's productive resources.
Anything of value that a company owns.
Things that the business owns.
Items owned by the company or expenses that have been paid for but have not been used up.
A common element of a financial plan that describes projected capital spending and the
Average accounting return
The average project earnings after taxes and depreciation divided by the average
Average rate of return (ARR)
The ratio of the average cash inflow to the amount invested.
book rate of return
Accounting income divided by book value.
Book yield is the investment income earned in a year on a portfolio of assets purchased over a number of years and at different interest rates, divided by the book value of those assets.
CARs (cumulative abnormal returns)
a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
A statistical methodology applied to a set of firms at a particular point in time.
Cumulative abnormal return (CAR)
Sum of the differences between the expected return on a stock and the
Value of cash, accounts receivable, inventories, marketable securities and other assets that
Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.
Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.
Current refers to cash and those assets that will be turned
Cash and other company assets that can be readily turned into cash within one year.
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
The return realized on a portfolio for any evaluation period, including (1) the change in market
Dollar-weighted rate of return
Also called the internal rate of return, the interest rate that will make the
Ex post return
Related: Holding period return
The expected return of a portfolio based on the expected returns of its component assets and
Excess return on the market portfolio
The difference between the return on the market portfolio and the
Also called abnormal returns, returns in excess of those required by some asset pricing model.
Exchange of assets
Acquisition of another company by purchase of its assets in exchange for cash or stock.
Expected future return
The return that is expected to be earned on an asset in the future. Also called the
The return expected on a risky asset based on a probability distribution for the possible rates
The total amount of money (return) an investor anticipates to receive from an investment.
Expected return-beta relationship
Implication of the CAPM that security risk premiums will be
Expected return on investment
The return one can expect to earn on an investment. See: capital asset
Claims on real assets.
Claims to the income generated by real assets. Also called securities.
Things that the business owns and are part of the business infrastructure – fixed assets may be
An informal term that refers to the variety of long-term operating
Land, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation.
Fixed Assets Turnover Ratio
A measure of the utilization of a company's fixed assets to
Geometric mean return
Also called the time weighted rate of return, a measure of the compounded rate of
Holding period return
The rate of return over a given period.
Total return over a given horizon.
Incremental internal rate of return
IRR on the incremental investment from choosing a large project
assets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises.
Intangible fixed assets
Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).
Internal rate of return
Dollar-weighted rate of return. Discount rate at which net present value (NPV)
Internal rate of return
a. The average annual yield earned by an investment during the period held.
Internal rate of return
The rate of return at which the present value of a series of future
Internal rate of return (IRR)
A discounted cash flow technique used for investment appraisal that calculates the effective cost of capital that produces a net present value of zero from a series of future cash flows and an
internal rate of return (IRR)
The precise discount rate that makes the
Internal Rate of Return (IRR)
The discount rate that equates the present value of the net cash
internal rate of return (IRR)
the expected or actual rate of
internal rate of return (IRR)
Discount rate at which project NPV = 0.
Inventory returned from a customer for any reason. This receipt
Leveraged required return
The required return on an investment when the investment is financed partially by debt.
Value of property, equipment and other capital assets minus the depreciation. This is an
Longer-Term Fixed Assets
assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.
The return on the market portfolio.
Money rate of return
Annual money return as a percentage of asset value.
Multiple rates of return
More than one rate of return from the same project that make the net present value
The difference between total assets on the one hand and current liabilities and noncapitalized longterm
net realizable value approach
a method of accounting for by-products or scrap that requires that the net realizable value of these products be treated as a reduction in the cost of the primary products; primary product cost may be reduced by decreasing either
A tangible asset with unique physical properties, like a parcel of land, a mine, or a
Optimization approach to indexing
An approach to indexing which seeks to Optimize some objective, such
A cluster of accounts that are listed after fixed assets on the balance sheet,
Other current assets
Value of non-cash assets, including prepaid expenses and accounts receivable, due
assets, the title of which are held personally rather than in the name of some other legal entity.
Portfolio internal rate of return
The rate of return computed by first determining the cash flows for all the
Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior
to that of common stock. Preferred stock typically does not carry the right to vote.
Publicly traded assets
assets that can be traded in a public market, such as the stock market.
A contra account that reduces purchases by the amount of items purchased that were subsequently returned.
Current assets minus inventories.
rate of return
Total income per period per dollar invested.
Rate of Return
return on invested capital (calculated as a percentage). Often an investor has, as one of their investment criteria, a minimum acceptable rate of return on an acquisition.
RATE OF RETURN ON STOCKHOLDERS’ EQUITY
The percentage return or profit that management made on each dollar stockholders invested in a company. Here’s how you figure it:
RATE OF RETURN ON TOTAL ASSETS
The percentage return or profit that management made on each dollar of assets. The formula is:
Rate of return ratios
Ratios that are designed to measure the profitability of the firm in relation to various
Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a
assets used to produce goods and services.
Realizable Revenue A revenue transaction where assets received in exchange for goods and
services are readily convertible into known amounts of cash or claims to cash.
The return that is actually earned over a given time period.
realized value approach
a method of accounting for byproducts or scrap that does not recognize any value for these products until they are sold; the value recognized
A tangible asset with physical properties that can be reproduced, such as a building or
The minimum expected return you would require to be willing to purchase the asset, that is,
assets that remain after sufficient assets are dedicated to meet all senior debtholder's claims in full.
Residual dividend approach
An approach that suggests that a firm pay dividends if and only if acceptable
The change in the value of a portfolio over an evaluation period, including any distributions made
return of capital
the recovery of the original investment (or principal) in a project
return on capital
income; it is equal to the rate of return multiplied by the amount of the investment
Return on capital employed (ROCE)
The operating profit before interest and tax as a percentage of the total shareholders’ funds plus
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