Return on Assets, usually the abbreviation ROA is used. It is a term that refers to the production power and measures the profit with total assets invested in the business regardless of the financing method. Important is, whether the enterprise can effectively use its capital base.
Calculation in several variants:
ROA = EBIT / Assets
ROA = EAT / Assets
ROA = EBIT × (1-t) / Assets
ROA = EAT + Interest × (1-t) / Assets
where: t… income tax rate
The most complicated indicator is the one with just EBIT in the numerator. It is useful especially when the income tax rate changes over time, when the funding structure changes or when comparing enterprises with different financing structure. The possibility of EBIT × (1-t) in the numerator is useful when comparing enterprises with different share of liabilities in the financial structure.