ROTA Calculator (Return on Total Assets)
Calculate Return on Total Assets (ROTA) to measure operating efficiency before leverage. Distinguishes between EBIT and Net Income for precise financial analysis.
1. Determine EBIT
2. Total Assets
About
Return on Total Assets (ROTA) is a pure efficiency ratio used by analysts and investors to determine how effectively a company uses its assets to generate earnings. Unlike Return on Equity (ROE), which can be inflated by high debt levels, or Return on Assets (ROA), which typically uses Net Income (affected by tax and interest), ROTA focuses on EBIT (Earnings Before Interest and Taxes).
This distinction is crucial. By using EBIT, ROTA isolates operating performance from the company's capital structure and tax environment. This makes it the ideal metric for comparing companies in the same industry that may have vastly different debt strategies. A high ROTA indicates that the management is squeezing maximum value out of its machinery, inventory, and property, regardless of how those assets were financed.
Formulas
ROTA looks at earnings generated by the assets before the costs of financing those assets are paid. The strict formula is:
Where EBIT is:
Reference Data
| Industry Sector | Avg. ROTA (Low) | Avg. ROTA (High) | Capital Intensity |
|---|---|---|---|
| Software / SaaS | 10% | 25% | Low (Asset Light) |
| Retail (General) | 5% | 10% | Medium (Inventory heavy) |
| Heavy Manufacturing | 3% | 8% | High (Machinery heavy) |
| Utilities | 3% | 6% | Very High (Infrastructure) |
| Pharmaceuticals | 8% | 15% | Medium (R&D heavy) |
| Hospitality / Hotels | 2% | 6% | High (Real Estate) |
| Consulting / Services | 15% | 30% | Low (Human Capital) |
| Transportation / Airlines | 1% | 5% | Very High (Fleet) |