A higher return on assets ratio indicates that the company is able to generate more income from the given amount of assets. Let us take the example of a company with reported earnings before interest and taxes (EBIT) of $75,000 as per the income statement. The _____ ratio takes this income divided by interest expense to determine the risk for creditors. Earning assets usually include […] As an example, Wells Fargo produced net income of just over $23 billion in 2015, and had total assets of $1.787 trillion at the end of the year. Debt to Asset Ratio Formula. Return On Assets Formula = (Net Income + Interest (1-Tax Rate))/Average Total Assets Price-earnings ratio = Earnings per share 7. Income Statement's Formula. When using the first formula, average total assets are usually used because asset totals can vary throughout the year. The lower the percentages the better, a business or farm should be no higher than 5% to be considered strong. This ratio can also be represented as a product of the profit margin and the total asset turnover. ... Debt to assets ratio = total liabilities/total assets. Interest-Expense ratio is measured as a percentage, the lower the percentage the stronger the ratio. Free cash flow = cash provided by operations - capital expenditures - cash dividends ... (Net Income + Interest Expense + Tax Expense) / Interest Expense. [10] Total Income to Earning Assets = Total Income / Average earning assets * 100 [11] Risk provisions to Total income = Total of Risk provisions made during year / Total Income * 100. Debt to asset indicates what proportion of a company’s assets are being financed with debt rather than equity. The formula for dollar change for financial statement analysis is … A company which has a total debt of $20 million out of $100 million total asset, has a ratio of 0.2. Income related figures are taken from income statement whereas for average total calculation, we need current and prior year’s total assets figure or in other words opening and cloing total assets. Bank analysts want to know what percentage of a company’s assets are actually generating income. The net interest income formula is used to calculate the amount of interest income that is left after covering interest expenses. Return on Total Assets Formula – Example #1. It is computed by taking net income divided by average total assets for the period. The Interest-Expense ratio intimates the amount of gross income that is being spent to pay the interest on borrowed money. Unamortized Discount Return on assets indicates return generated by a company on its assets. This ratio needs information from income statement and statement of financial position. The total interest income, total interest expense, and net interest income can be found on a bank's income statement. Banks earn interest through loans, mortgages, and other similar interest earning products. Net income = revenues - expenses. Free Cash Flow. Either formula can be used to calculate the return on total assets. In banking industry another relevant ratios are : [12] Cost of deposits = Total interest paid on deposits / … They determine this with the earning assets to total assets ratio. Of all the assets that a company owns (referred to as total assets), analysts want to know what percentage of them are actually generating income. 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