The mean average of a firm’s total assets over a number of averaging periods (usually five-month periods):
In general, this average is calculated by adding total assets at the beginning of a time period to the total assets at the end of that period, and averaging the total. Calculating average total assets helps an analyst measures a company’s return on assets (ROA). For example, if a company has reported $1 million and $2 million in assets in a given year and a previous year, its average total assets is then:
Average total assets= (1 m+ 2 m)/ 2 = $1.5 m
Dividing the company’s net income (say $0.5 million) by the average total assets will produce return on assets:
ROA= 0.5 m /1.5 m= 33.33%
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