Cash return on assets
factor.formula
in:
This formula calculates the cash return on assets. The numerator is the net cash flow from operating activities in the last 12 months (TTM), which represents the actual cash inflow generated by the company from operating activities, excluding investment and financing activities. The denominator is the average total assets, which is the average of the total assets at the beginning and end of the period, representing the average size of assets owned by the company during the reporting period. The use of average total assets is to better reflect the average level of assets during the reporting period and avoid deviations in the calculation results due to data at the beginning or end of the period.
- :
Refers to the net amount of cash inflows actually obtained by the company through daily operating activities in the last 12 months minus cash outflows. This is an important indicator of the company's profit quality and operating efficiency. TTM (Trailing Twelve Months) means rolling 12 months, which can reflect the company's latest operating conditions more timely.
- :
Refers to the total assets owned by an enterprise on average during a certain period of time, which is equal to half of the sum of the total assets at the beginning of the period and the total assets at the end of the period. Using the average value can reduce the distortion of indicators caused by fluctuations in the asset size at the beginning or end of the period, and more accurately reflect the asset operation of the enterprise during the entire period of time.
- :
Refers to the total assets of a company at the beginning of the reporting period (e.g., the beginning of the first quarter, the beginning of the year). This data can be found in the balance sheet of the financial statements.
- :
Refers to the total assets of a business at the end of the reporting period (e.g., the end of the first quarter, the end of the year). This data can be found in the balance sheet of the financial statements.
factor.explanation
The Asset Cash Return Rate measures a company's ability to use its total assets to create operating cash flow. The higher the ratio, the more efficient the company is in using its assets to create cash flow, the shorter the cash recovery cycle of its assets, and the stronger the company's cash acquisition ability. A higher asset cash return rate usually means that the company has strong asset operation capabilities, high-quality profitability, and stable cash flow. This indicator not only reflects the profitability of a company, but more importantly, it reflects the quality of its profitability, because this indicator focuses on real cash flow rather than accounting profit, which can effectively avoid the problem of inflated profits caused by accounting operations. In investment analysis, the asset cash return rate is an important indicator for evaluating a company's profit quality and operating efficiency, and is often used to compare with other companies in the same industry to determine the company's relative competitive advantage.