Return on Net Operating Assets (RNOA)
factor.formula
Return on Operating Assets (RNOA):
Return on operating assets (RNOA) is a key measure of how efficiently a business uses its operating assets to generate profits. It measures the profit generated per unit of net operating assets by dividing the operating profit for the last twelve months (TTM) by the average net operating assets. A higher RNOA generally indicates that a business is using its operating assets more efficiently to generate profits.
Average net operating assets:
Average net operating assets is the denominator used in the calculation of RNOA and is intended to more accurately reflect the average level of net operating assets used by the business during the period. By using the average of the net operating assets at the beginning and end of the period, biases caused by the specificity of the balance sheet date are reduced. This value is calculated by dividing the sum of the net operating assets at the beginning and end of the period by 2.
Operating Profit:
The calculation of operating profit aims to exclude gains and losses related to non-operating activities to more accurately reflect the profitability of the company's core operating activities. It is obtained by subtracting non-recurring gains and losses from net profit (including minority shareholders' gains and losses) and adding net financial expenses after tax. Net financial expenses are financial expenses minus net interest income, multiplied by (1-income tax rate), which reflects the impact of after-tax interest expenses on operating profit. The income tax rate here represents the marginal income tax rate applicable to the company, rather than the average tax rate, which is usually around 25%.
Net operating assets:
Net operating assets are all the assets used by a company in its operations minus the liabilities used in its operations. Net operating assets can be calculated in two ways: by adding financial liabilities to shareholders' equity (including minority interests) minus financial assets; or by subtracting operating liabilities from operating assets. These two methods are equivalent in accounting. Net operating assets represent the capital invested in the company's core operations, and their size reflects the scale and complexity of the company's operations.
In the formula:
- :
The abbreviation of Trailing Twelve Months, which refers to the data of the most recent 12 months, is usually used to calculate financial indicators to eliminate the impact of seasonal factors.
factor.explanation
The core idea of return on operating assets (RNOA) is to separate the operating activities and financial activities of an enterprise, and focus on evaluating the profitability of the core operating activities of the enterprise. By excluding the impact of financial assets, financial liabilities and non-recurring gains and losses, RNOA can more objectively reflect the ability of an enterprise to create profits through its operating assets. This indicator is particularly suitable for scenarios where the profitability of enterprises with different capital structures needs to be compared, and it can more effectively evaluate the efficiency of the management's use of operating assets. A high RNOA usually means that the company has stronger core competitiveness and can more effectively use operating assets to create value.