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Monday, August 22, 2011

Retained Earnings To Total Assets Ratio

The retained earnings to total assets (RE/TA) ratio measures the firm's ability to accumulate earnings using its assets. A higher ratio is preferable because it indicates that the company is able to retain more earnings. It can be calculated as follows:

Formula:
RE/TA = retained earnings / total assets

Example:
CFA Ltd has the following information:
Retained profits $600,000
Freehold buildings

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