Return On Assets

The return on assets can be calculated by:

Net income divided by  Total assets

This ratio will tell investors  how effective is a company in investing its money. The greater  the  value  the better. Do note that a company should also compare the return on asset metric with the peers in the same industry.  The company with a greater return on asset as compared to another will grow faster than the other.

Study the return on equity with the return on total assets

If the return on equity and the return on total assets of a company are consistently higher than its peers, that may mean that it enjoys some form of competitive advantage and it is creating value for its shareholders at a faster rate than its peers.