Getting to know finance and accounting in your business—exercise for in-house lawyers
Published by a LexisNexis In-house Advisor expert
PrecedentsGetting to know finance and accounting in your business—exercise for in-house lawyers
Published by a LexisNexis In-house Advisor expert
Precedents
This Getting to know finance and accounting in your business—exercise for in-house lawyers aims to give you insight into finance and accounting in your own organisation by equipping you with key financial questions. You should record all answers in the table. You may well need to ask your
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Jurisdiction(s):
United Kingdom
Key definition:
Return on total assets definition
What does Return on total assets mean?
A measure of how good a company is at ‘squeezing’ earnings out of the assets employed in its business, which is calculated as follows: Return on assets = (profit before interest and tax)/(fixed assets + current assets). If you are using this ratio to evaluate a company, you need to consider what kind of business the company is in. ‘People’ businesses, such as advertising agencies, need very few capital assets compared with a manufacturer which typically needs to invest large amounts in plant and equipment. In general, a return of 12% is adequate and a return of 16% or more is considered good.
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