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Financial Analysis | R

RONA

It stands for return on net assets. By definition, it a profitability ratio in which only interest-bearing debt along with equity are taken into account in calculation. It compares earnings available to owners and creditors to the assets financed by those owners and creditors. As such, RONA is measured as:

RONA

For example, a company has reported $50,000, $20,000, $300,000, and $300,000 in net income, interest expenses, equity, and interest-bearing debt, respectively. If corporate tax rate is 35%, then its RONA is:

RONA Example

That is 10.5%. This means every dollar provided by owners and creditors produces 10.5 cents.

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