Return on net assets

Despite this general decline, some companies are still doing excellently in 2004, the top three players boasted an average return on net assets (RONA) of more than 25 percent, while the bottom three players had to settle for less than six percent on average (Fig. 8.5). This spread, a factor of around four, is much bigger than in other industries. The top companies in specialty chemicals seem to know the formula for success, and we will share below our perspective on the specific challenges that need to be addressed in order to remain or become a top player in this increasingly problematic competitive arena. 

Return on Net Assets (RONA) h Increase productivity Optimize assets y Reduce inventories /I r Reduction in repair and maintenance costs/conversion costs Optimized production planning / Reduction in off-specification material Optimized raw material and finished goods logistics... 

Return on total assets Net profit after taxes/total assets 7-10%... 

The average return on net operating assets (RONOA) of the sample was 9%. The last two figures exemplify the capital intensity of custom manufacturing (CM)-biased fine-chemical companies. In order to achieve a good return of capital employed, a healthy margin is mandatory. A more standard... 

The return on total assets ratio is the net profit after taxes divided by the total assets expressed as a percentage. It reflects the overall return that a company has earned on its assets. The average for all industries is 10%, but figures vary widely. 

The return-on-equity ratio is the net income after taxes and interest divided by the stockholders equity. It sometimes is called the return on net worth, and this ratio is probably the best measure of management s performance. Returns on equity vary depending on company performance, but a figure of 15% is not um-easonable. The return-on-total assets ratio is the net profit after taxes divided by the total assets expressed as a percentage. It reflects the overall return that a company has earned on its assets a reasonable value is about 10%. 

Return on total assets (ROA) = Net income available to common... 

Ratios well below 1 may indicate financial problems ahead while those substantially greater than 1 may point to poor credit control or under-utilization of cash. This ratio is sometimes known as the acid test . The principal profitability ratio in use is the net profit before interest and tax (NPBIT) to net assets or return on capital employed. 

The most widely used gage of profitability is the ratio of profit to net assets (or return on capital employed) ... 

Return on capital Profit/Sales Sales/Net assets... 

The EVA [10,11] combines information from the profit and loss statement (revenue, costs, earnings before interests and taxes (EBIT), etc.) and the financial sheet (net working capital (NWC), assets, etc.). The EVA is the interest calculation in absolute measurements and strongly related to the return on capital employed (ROCE) where the gained interest rate is calculated (Figure 1.7). In the long term, this interest rate should be above the capital costs of the company which is the interest rate the company has to pay for a credit on the capital market. Hence, a positive EVA means that the company has earned some money above the capital costs. 

ROA Net nrofit Total assets Indicator to compare total profit return on assets specifically in asset-intensive industries... 

Net profit margin Return on assets Return on equity... 

Return on assets (ROA) = net income -f- average total assets... 

Return on assets A profitability ratio reflecting a company s ability to generate net income as a percentage of its total assets. 

The central financial assumption for the calculation of second generation leve-lized PV electricity and H2 prices is the assignment of the depreciated 10% value of first generation assets as the second generation investment value for equity holders. All other second generation capital investments, revenues, expenses, depreciation, and taxes are entered into the net present value cash flow model in exactly the same manner as the first generation model. The capital structure of H2 production and distribution firms is assumed to remain 30% equity and 70% debt. The rate of return on equity remains 10%, the rate of return on debt remains 7%, the income tax rate remains 39%, and the discount rate remains 6%. 

For a broader perspective. Figure 3.3, the financial family tree, ties together the income statement and the balance sheet. The upper part of the figure includes information obtained from the income statement, while the lower part contains information from the balance sheet, namely, total assets and total liabilities. The difference between these two figures is the stockholders equity from which the return on equity can be calculated. The net income found in the income statement divided by the stockholders equity is the return on equity. Figures 3.2 and 3.3, therefore, depict how the income statement and the balance sheet are related. 

Among oil companies Exxon has been one of the most profitable companies. In 1998 the return on assets was 6.8% and the return on equity was 14.8% (Table 7.9), compared with the median of the top 20 refiners of 2 and 5%, respectively (see Tables 7.23 and 7.24). Exxon s net revenue in 1998 declined about 15% from 1997 (Table 7.10). This was due in part to restructuring, and softness in the markets, as well as to fluctuation in crude oil prices. 

Ranking Company Net sales (millions) R D (%) Capital spending (%) Return on assets (%) Sales per employee (thousands) ... 

Return on assets refers to the ratio of company s net income to its total assets, computed as... 

Rate of return on capital (X4) = total profit/net value of fixed assets 100%... 

---