how to calculate rona
the three components of rona are net income fixed assets and net working capital net income is found in the income statement and is calculated as revenue minus expenses associated with making or selling the company s products operating expenses such as management salaries and utilities interest expenses associated with debt and all other expenses fixed assets are tangible property used in production such as real estate and machinery and do not include goodwill or other intangible assets carried on the balance sheet net working capital is calculated by subtracting the company s current liabilities from its current assets it is important to note that long term liabilities are not part of working capital and are not subtracted in the denominator when calculating working capital for the return on net assets ratio at times analysts make a few adjustments to the ratio formula inputs to smooth or normalize the results especially when comparing to other companies for example consider that the fixed assets balance could be affected by certain types of accelerated depreciation where up to 40 of the value of an asset could be eliminated in its first full year of deployment additionally any significant events that resulted in either a large loss or unusual income should be adjusted out of net income especially if these are one time events intangible assets such as goodwill are another item that analysts sometimes remove from the calculation since it is often simply derived from an acquisition rather than being an asset purchased for use in producing goods such as a new piece of equipment 