Can You Achieve a 20% Improvement on Your Return on Assets? Yes – But It’s Not Piecemeal

by | Feb 1, 2023

Return on assets, or ROA, can be defined by the amount of financial and operational income a company receives in a financial year compared to its total net assets. It is a ratio between a company’s net earnings before interest and taxes (EBIT) and its net assets. In essence, it reveals how profitable a company is relative to its total assets.

ROA or Return on Assets = EBIT / Total Assets

Can you achieve a 20% improvement in ROA?

Improving your business’s ROA involves three main strategies:

1) Increasing the net income.

Your business can increase its net income by increasing sales, reducing the cost of goods sold, and reducing operating expenses.

2) Lowering total assets.

Total assets include both fixed and current assets.

  • Current assets: Your business can improve its ROA by reducing current assets like cash, inventory, account receivable, and other short-term current assets.
  • Fixed assets: A business with a considerable amount of fixed assets can have a lower ROA because of increased depreciation costs. To maintain optimum fixed assets, the business has to analyze its asset performance and only retain those assets that can improve the overall company’s efficiency.

You can reduce the total asset value of your business by identifying low-performance assets and getting rid of them and leasing seasonal assets rather than owning them to manage depreciation costs.

3) Using asset planning, maintenance and management.

Achieving an improvement in your ROA requires an elaborate strategy and methodical asset planning and management that cannot be achieved using a piecemeal approach.

4) Optimizing inventory management

Whether inventory is used for maintenance or for resale, making sure you have up-to-date equipment information at your fingertips will increase your efficiency and save you money.

How can Fame Intel help your business improve its return on assets?

Fame Intel is a premier asset management company that helps you manage and control every aspect of your rental, equipment, service, sales, and retail business. Our easy-to-use asset management solutions can help you maintain an inventory of your products that improves sales and profitability to improve your firm’s overall financial performance, including improving return assets.

From coordinating and tracking materials, technicians, equipment, and customers to automating asset financing, leases, payroll retail, leases, maintenance, inventory, parts, and more, small to large companies trust Fame Intel for solutions and tools to transcend their business, out-smart competitors, and provide their customers with premier service.

Highlights of our all-in-one mobile-first ERP platform providing customized asset management solutions include:

  • Asset financing: Our asset financing tool can track your loan agreements and outstanding loans, keeping you on track with all your assets.
  • Fixed asset accounting: Our rental software can help you take complete operational and financial control over fixed assets like equipment.
  • Mobile apps and invoicing: From scanning inventory, creating invoices, snapping photos, and collecting signatures to digital automation of invoices, Fame Intel’s platform keeps you nimble, responsive, and modern.

One main tenet of Fame Rental is everything in one database so that you can make better (fearless) decisions. Increasing ROA requires a holistic approach, which cannot be achieved with scattered information.

We work with rental companies, dealerships, field service and installation companies, oil refineries, food suppliers, and more in various industries, like oil & gas, HVAC, transportation, and equipment rental, to name a few. Mike Weiss, CFO at C&G Energy Services, vouches for how Fame Intel’s software has helped his business track 500 pieces of rental equipment daily.

To know how Fame Intel can improve your return on assets through asset management, contact us for more information or to schedule a demo!

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