Sitemap

EBIT to total assets ratio definition

Description

Earnings before interest and tax (EBIT) to total assets ratio indicates a proportion between the measure that shows company’s profitability and company’s assets. In short, it represents general profitability of the company’s assets. Data to calculate this ratio is collected from the income statement and balance sheet.

This ratio is similar to ROA ratio. The only difference if that when calculating ROA, we use net earnings (net income), whereas in EBIT/TA ratio we use earnings before interest and tax.

Norms and limitations

There are no general norms for this ratio.

It is recommended to compare this ratio to those of the companies, working within the same industry.

Formula

Earnings before interest and taxes (EBIT) equal net income, plus interest expense, plus taxes.

Assets (Total assets) - a balance sheet item, representing what a company owns.