Total Assets

This measure is useful if the firm or division is being evaluated for purchase by an acquirer with a different tax rate or structure.

A more useful measure of return relates the operating income to the capital invested in the firm, where capital is defined as the sum of the book value of debt and equity. This is the return on capital (ROC). When a substantial portion of the liabilities is either current (such as accounts payable) or non-interest bearing, this approach provides a better measure of the true return earned on capital employed in the business.

BV of Debt + BV of Equity

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