# How to Calculate Return on Net Assets

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A return on net assets is a financial ratio used by investors to determine how capital-intensive a company is. Capital-intensive companies must have a significant amount of money tied up in assets such as machinery in order to produce their goods. Having a higher return on net assets means a company is generating more profit with fewer dollars tied up in capital. To calculate the return on net assets, you need to know the company's after-tax profit, the working capital and the fixed assets of the company.

### Things You'll Need

• Calculator
• Annual report

Look in the company's annual report to find the company's after-tax profit, the value of the company's fixed assets and the working capital, including cash the company keeps on hand.

Add the value of the company's fixed assets to the working capital of the company. For example, if the company had \$8 million in fixed assets and \$2 million in working capital, you would get a total of \$10 million.

Divide the net income by the sum of the working capital and fixed assets to calculate the return on net assets, expressed as a decimal. Continuing the example, if the company had a net income of \$800,000, you would divide 800,000 by 10 million to get 0.08.

Multiply the return on net assets, expressed as a decimal, by 100 to convert it to a percentage. Finishing the example, you would multiply 0.08 by 100 to find a return on net assets of 8 percent.

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