|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
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.
Part of the return that is not due to systematic influences (market wide influences). In
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 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.
A common element of a financial plan that describes projected capital spending and the
The average project earnings after taxes and depreciation divided by the average
The ratio of the average cash inflow to the amount invested.
A statistical methodology applied to a set of firms at a particular point in time.
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
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
Expected return on investment
The return one can expect to earn on an investment. See: capital asset
Expected return-beta relationship
Implication of the CAPM that security risk premiums will be
Claims on real assets.
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
Internal rate of return
Dollar-weighted rate of return. Discount rate at which net present value (NPV)
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
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
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
Other current assets
Value of non-cash assets, including prepaid expenses and accounts receivable, due
Portfolio internal rate of return
The rate of return computed by first determining the cash flows for all the
Publicly traded assets
assets that can be traded in a public market, such as the stock market.
Current assets minus inventories.
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
The return that is actually earned over a given time period.
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 on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12
Return on investment (ROI)
Generally, book income as a proportion of net book value.
Return on total assets
The ratio of earnings available to common stockholders to total assets.
A variant of pure expectations theory which suggests that the return that an
Risk premium approach
The most common approach for tactical asset allocation to determine the relative
Riskless rate of return
The rate earned on a riskless asset.
The minimum available return that will trigger an immunization strategy in a contingent
Approach to the determination of the optimal capital structure asserting that insiders in a
Stratified sampling approach to indexing
An approach in which the index is divided into cells, each
The return of a portfolio over a shorter period of time than the evaluation period.
T-period holding-period return
The percentage return over the T-year period an investment lasts.
Time-weighted rate of return
Related: Geometric mean return.
Total dollar return
The dollar return on a nondollar investment, which includes the sum of any
In performance measurement, the actual rate of return realized over some evaluation period. In
Unleveraged required return
The required return on an investment when the investment is financed entirely
Variance minimization approach to tracking
An approach to bond indexing that uses historical data to
Anything of value that a company owns.
Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.
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:
RETURN ON INVESTMENT (ROI)
In its most basic form, the rate of return equals net income divided by the amount of money invested. It can be applied to a particular product or piece of equipment, or to a business as a whole.
Accounting rate of return (ARR)
A method of investment appraisal that measures
Things that the business owns.
Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.
Things that the business owns and are part of the business infrastructure – fixed assets may be
Intangible fixed assets
Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).
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
Return on capital employed (ROCE)
The operating profit before interest and tax as a percentage of the total shareholders’ funds plus
Return on investment (ROI)
The net profit after tax as a percentage of the shareholders’ investment in the business.
Tangible fixed assets
Physical assets that can be seen and touched, e.g. buildings, machinery, vehicles, computers etc.
Target rate of return pricing
A method of pricing that estimates the desired return on investment to be achieved from the
Items owned by the company or expenses that have been paid for but have not been used up.
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.
A contra account that reduces purchases by the amount of items purchased that were subsequently returned.
A contra account that offsets revenue. It represents the amount of sales made that were later returned.
Current refers to cash and those assets that will be turned
An informal term that refers to the variety of long-term operating
internal rate of return (IRR)
The precise discount rate that makes the
return on equity (ROE)
This key ratio, expressed as a percent, equals net
return on investment (ROI)
A very general concept that refers to some
return on sales
This ratio equals net income divided by sales revenue.
Fixed Assets Turnover Ratio
A measure of the utilization of a company's fixed assets to
Internal Rate of Return (IRR)
The discount rate that equates the present value of the net cash
Return on Common Equity Ratio
A measure of the percentage return earned on the value of the
Return on Total Assets Ratio
A measure of the percentage return earned on the value of the
Total Debt to Total Assets Ratio
See debt ratio
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