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Return on Net Assets (RONA)

Return on Net Assets (RONA) is a financial ratio that measures a company's profitability relative to its net assets. It is calculated by dividing net income by the net assets (total assets minus current liabilities). This ratio indicates how efficiently a company is using its net assets to generate profits. A higher RONA suggests better asset utilization and overall operational efficiency, making it a key metric for evaluating capital-intensive industries.

Example

A company with net income of $5 million and net assets of $50 million has a RONA of 10%, indicating that it generates $0.10 of profit for every dollar of net assets.

Key points

• Measures profitability relative to net assets (assets minus liabilities).

• A higher RONA indicates more efficient asset utilization.

• Useful for evaluating companies in capital-intensive industries.

Quick Answers to Curious Questions

It shows how efficiently companies in capital-intensive sectors are using their net assets to generate profits.

RONA focuses on net assets (after accounting for liabilities), while ROA measures returns relative to total assets.

A low RONA may suggest inefficient use of assets, signaling potential operational or financial issues.
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