After-Tax Return On Assets

There are several ways to determine whether a company is doing a good job in generating profits. Return on assets is one of these, and it focuses on resource allocation efficiency. Or rather, given the company's amount or size of assets, how profitable was it? And this this good bad, or ugly?

Return on assets takes the company's income and divides that by the dollar value of its assets (or the euro value or the yen value...whatever currency seems appropriate for the company). The result comes out as a percent, with a higher number suggesting a better job of utilizing assets.

The after-tax return on assets runs this same equation, but uses after-tax income. It gives a better real-world look at the return on assets figure, since it includes the amount the company has paid in taxes.