Learn what return on net assets measures and why it is useful when comparing operating performance with the net asset base required to run the business.
The return on net assets (RONA) measures profit relative to net assets used in the business. It is commonly used when analysts want to see how effectively a company turns its operating asset base into earnings.
Definitions vary by industry, but RONA typically compares earnings with fixed assets plus working capital or another net operating asset measure. The point is to judge return after accounting for the asset base the business actually needs to operate.
A common form is:
RONA = earnings / net assets
If a manufacturer earns $18 million and uses $150 million of net operating assets, its RONA is 12%.
An analyst says, “RONA is always identical to ROA.”
Answer: No. RONA often uses a narrower operating-asset base than total-assets ROA.