How Do I Calculate Average Total Assets?
Average total assets are calculated by adding together the value of assets at the beginning and end of an accounting period and dividing the sum by two, according to TheFreeDictionary. An accounting period is defined as the period of time reflected in the financial statements of businesses, usually a quarter or a year.
According to TheFreeDictionary, in accounting terms, an asset is defined as anything of value owned by a company or person, including physical items such as real estate or stocks. Assets also include intangibles such as monies owed to a person or company and valuable rights such as patents.
The Business Dictionary cites an example of an average total assets calculation for a two-year period. This is calculated by first adding up the total value of assets in year one and then adding up the total value of assets in year two. The two years are then added together and divided by two.
Banks and financial institutions often use a return on average assets calculation to judge the profitability and performance of a firm, according to Investopedia. ROAA is determined by taking net income and dividing it by total average assets. The final ratio is expressed as a percentage of total average assets. This calculation offers clues into how efficiently a business utilizes its assets.
