# Return on Net Assets (RONA)

## What it is:

Return on net assets is a metric which measures a company's financial performance with regard to fixed assets combined with working capital.

## How it works (Example):

Return on net assets (RONA) is calculated by dividing a company's net income in a given period by the total value of both its fixed assets and its working capital. Increases in RONA indicate higher levels of profitability.

RONA = Net Income / (Fixed Assets + Working Capital)

For example, suppose that company XYZ owns, in a given period, \$500k in fixed assets accompanied by \$300k in working capital. In the same period, XYZ generates \$200k in net income. XYZ's RONA would be calculated in the following way:

RONA = \$200,000 net income / (\$500,000 A Fixed + \$300,000 C Working)
= \$200,000 net income / \$800,000 A Fixed and C Working
= 0.25 or 25%

In this instance, XYZ generated a 25% return on its working capital combined with its fixed assets.

## Why it Matters:

The RONA calculation is similar to that of the return on assets (ROA) metric. Unlike ROA, RONA takes a company’s associated liabilities into account.

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