Return on Net Assets (RONA)
What is Return on Net Assets (RONA)?
How Does Return on Net Assets (RONA) Work?
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 Does Return on Net Assets (RONA) Matter?
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