companydata.dkReturn on assets (afkastningsgrad)
Return on assets (afkastningsgrad) shows how much operating profit a company generates per krone tied up in assets. It is calculated as operating profit divided by the balance sheet total, multiplied by 100.
Return on assets answers the question: how efficiently does the company's total capital work? Two companies with the same profit are not equally capable if one needs twice the assets to create it.
How return on assets is calculated
Return on assets = operating profit (EBIT) / balance sheet total × 100. An operating profit of DKK 1 million on a balance sheet total of DKK 10 million gives a return on assets of 10%.
Interpretation
Return on assets should at minimum exceed the interest rate the company pays on its debt — otherwise the assets don't earn back their financing. Levels vary strongly between industries: asset-light service companies typically run high, property companies low.
Related terms
Operating profit (EBIT)
Operating profit (EBIT — Earnings Before Interest and Taxes) is the result of a company's core operations, before financial items and tax. It shows whether the business itself makes money.
Balance sheet total (balancesum)
The balance sheet total (balancesum) is the sum of all the company's assets — and equally the sum of equity and liabilities, since the balance sheet balances by definition. It is used as a measure of company size.
Profit margin (overskudsgrad)
The profit margin (overskudsgrad) shows how large a share of revenue ends up as operating profit. It is calculated as operating profit divided by net revenue, multiplied by 100.
Return on equity (egenkapitalforrentning)
Return on equity (egenkapitalforrentning, ROE) shows how large a return the company generates on the owners' capital. It is calculated as the net result divided by equity, multiplied by 100.