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INVESTMENT

How To Increase Return on Asset

Azwimar Putranusa | YP 52B | 29114335

Introduction
Return on assets (ROA) is a financial ratio that shows the percentage of
profit a company earns in relation to its overall resources. It is commonly defined
as net income divided by total assets. Net income is derived from the income
statement of the company and is the profit after taxes. The assets are read from
the balance sheet and include cash and cash-equivalent items such as
receivables, inventories, land, capital equipment as depreciated, and the value of
intellectual property such as patents. Companies that have been acquired may
also have a category called "goodwill" representing the extra money paid for the
company over and above its actual book value at the time of acquisition.
The only reason your business owns assets is to produce income. You
measure your income in relation to your assets. This is called return on assets, or
ROA. Assets like equipment directly produce products that create income,
whereas buildings contribute indirectly to income, because they house incomeproducing equipment. You must constantly find ways to reduce asset costs and
increase income to keep your ROA as high as possible.

ROA=

Net Income After Tax
Total Assets

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we can make efficiency at material cost and labor cost. but not significantly as decreasing of total asset. We can lease our machine and/or all our fixed asset. In material cost. we can choose cheaper supplier. if the companies want to increase ROA. Increasing the sales We can produce more to increase the sales. 2. we can. the total asset can rapidly decrease. Therefore. The expenses may increase. but meet standard quality of our goods. such as CV / Fa or PT. with the aim of saving taxes.  Legal standing of corporate entity: we are searching for the right form of business. but don't forget to pay lease expense.  We should break down the business units into multiple companies. what we can do is: 1. 3. therefore we can reduce training cost for labor. we hired those experienced employees. To increase the numerator. 2 . Decreasing COGS (production cost) To decrease the production cost. but the problem is how we can increase the production without adding new machine? Absolutely. we have to increase the net income after tax (numerator) and decrease the total asset (denominator). and  Tax deffered income: we delay the recognition of revenue.  Conducting a conglomeration of business: the form of the union establishment vertically and horizontally. In labor cost. Doing tax avoidance (not tax evasion)  Maximizing tax deductible: we attempt to charge cash / non-cash maximum allowable Act.Analysis We look at the ROA formula.

telephone and internet expense insurance expense. 5. depreciation expense—equipment property tax expense. are:  selling expenses (salaries and wages expense (sales). total administrative expenses) We can reduce those expenses. but better when we relieve the expenses. bad debt expense.4. Decreasing interest With decreasing amounts of loan. and  administrative expenses (salaries and wages expense (general). we have to increase the equity to persistent the total of its own capital. we can pay to reduce interest on it. Decreasing expenses These expenses example. 3 . advertising expense. Thus. rent expense. total selling expenses).