The rate of return on total assets is computed by dividing

Dividing Net income by average total assets

Explanation:

The rate of return of total assets is a ratio used in measuring a company's revenue before deductibles when compared to its total net asset. It refers to the ratio between the net income and the average total assets of a given company at a particular point in time. This ratio is most times used to see how effectively an asset is being used in the production process.

Mathematically

ROTA = Net Income ÷ Average Total Asset

Equity before interest and tax by Average total asset

Explanation:

The rate of return on total asset is a measure of the ability of an organization to effectively generate a reasonable return for its total assets during a period.

This is calculated by comparing the relativity of the company's earning (equity before interest and tax) to the total net assets.

It is advisable to use equity before interest and tax for this purpose so that the effects of tax and interest will not alter the reality of the result.

The formula is EBIT / average total asset

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