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The phrase return on average assets (ROAA) is also used, to emphasize that average assets are used in the above formula. [2] This number tells you what the company can do with what it has, i.e. how many dollars of earnings they derive from each dollar of assets they control. It's a useful number for comparing competing companies in the same ...
The rate of return on a portfolio can be calculated indirectly as the weighted average rate of return on the various assets within the portfolio. [3] The weights are proportional to the value of the assets within the portfolio, to take into account what portion of the portfolio each individual return represents in calculating the contribution of that asset to the return on the portfolio.
An example capital allocation line. As illustrated by the article, the slope dictates the amount of return that comes with a certain level of risk. Capital allocation line (CAL) is a graph created by investors to measure the risk of risky and risk-free assets. The graph displays the return to be made by taking on a certain level of risk.
The fundamental accounting equation, also called the balance sheet equation, is the foundation for the double-entry bookkeeping system and the cornerstone of the entire accounting science. Like any equation, each side will always be equal. In the accounting equation, every transaction will have a debit and credit entry, and the total debits ...
The return on net assets (RONA) is a measure of financial performance of a company which takes the use of assets into account. [1][2] Higher RONA means that the company is using its assets and working capital efficiently and effectively. [3] RONA is used by investors to determine how well management is utilizing assets.
Internal rate of return (IRR) is a method of calculating an investment 's rate of return. The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or financial risk. The method may be applied either ex-post or ex-ante. Applied ex-ante, the IRR is an estimate ...
Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk. It is a formalization and extension of diversification in investing, the idea that owning different kinds of financial assets is less risky than owning ...
The weighted average return on assets, or WARA, is the collective rates of return on the various types of tangible and intangible assets of a company.. The presumption of a WARA is that each class of a company's asset base (such as manufacturing equipment, contracts, software, brand names, etc.) carries its own rate of return, each unique to the asset's underlying operational risk as well as ...