A measure of the net profitability of a business, especially a capital-intensive business with a high proportion of fixed assets. Return on net assets [RONA] calculates the ratio of net profit before interest and tax divided by total assets less current liabilities. This measures two aspects of performance: net profit margin and net asset turnover. The higher the value, the better, and if the return on capital is greater than the weighted average cost of capital, the company is creating value. Upstream oil companies are an example of a large capital-intensive business that measures of profitability like net profit margin have limited relevance. Investors consider RONA a preferable measure, amongst others, in this scenario, as if RONA is more than the cost of capital, value is being created. See also Economic Value Added, Profit and Ratio, Profitability.« Back to Glossary Index
Return on Net Assets
Discover the world’s largest Glossary of Procurement terms
With over 800 Procurement specific terms (and growing) you will find everything you need to know or thought you knew about the Procurement function. Our aim is to provide you with a comprehensive list collated from the Comprara Groups hub of training and consulting source materials.The Procurement Glossary has been compiled by industry expert Paul Rogers.