RONA Calculator (Return on Net Assets)

Evaluate asset utilization efficiency with the RONA Calculator. Ideal for manufacturing and asset-heavy industries to compare Net Income against Fixed Assets and Working Capital.

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Category Financial Ratios
Income Statement
Balance Sheet: Assets
Balance Sheet: Liabilities
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About

Return on Net Assets (RONA) is a performance metric specifically tailored for capital-intensive industries like manufacturing, construction, and utilities. Unlike general profitability ratios, RONA specifically answers: How well is the company using its plant, property, equipment, and working capital to generate profit?

High RONA values indicate that the company is squeezing maximum value out of its machines and inventory. Low values suggest that assets are sitting idle or are underutilized. This tool helps plant managers and CFOs identify if they should invest in new machinery or focus on optimizing existing operations.

manufacturing efficiency

Formulas

RONA compares net income to the specific assets used to generate it:

RONA = Net IncomeFixed Assets + Net Working Capital

Where Net Working Capital is defined as:

NWC = Current Assets − Current Liabilities

Reference Data

Asset Depreciation MethodDescriptionImpact on RONA
Straight-LineAsset value decreases equally every year.Stable RONA over time.
Declining BalanceHigher depreciation in early years.Lower Net Assets early on → Higher RONA sooner.
Units of ProductionBased on actual usage/output.Variable RONA based on activity.
Sum-of-Years' DigitsAccelerated depreciation.Similar to Declining Balance.

Frequently Asked Questions

ROA (Return on Assets) uses 'Total Assets' in the denominator, which includes everything. RONA uses 'Net Assets', which subtracts non-interest-bearing liabilities (like Accounts Payable). This makes RONA a better measure of how well the company uses the capital it actually had to pay for.
As Fixed Assets (machinery, buildings) depreciate, their book value on the balance sheet decreases. If Net Income remains constant, the denominator (Net Assets) gets smaller, causing the RONA percentage to rise mathematically, even if operational efficiency hasn't changed.
Traditionally RONA uses Net Income. However, some analysts prefer NOPAT (Net Operating Profit After Tax) to remove the impact of interest payments, focusing purely on operational asset efficiency.
Manufacturing companies typically aim for a RONA between 15% and 25%. A RONA below 10% often signals that the company has over-invested in capacity that isn't being used.