Total Assets
View All TermsTotal assets are all the assets a company owns.
From the capital sources of the assets, some of the assets are funded through shareholder™s paid in capital and retained earnings of the business. Others are funded through borrowed money. Therefore, total assets can be calculated as:
Total Assets
= Total Current Assets + Total Long Term Assets
= Total Shareholder™s Equity + Total Liability
Total Assets is connected with Return on Assets by
Return on Assets (ROA) = Net Income / Total Assets
In the article Joining The Dark Side: Pirates, Spies and Short Sellers, James Montier reported that In their US sample covering the period 1968-2003, Cooper et al find that firms with low asset growth outperformed firms with high asset growth by an astounding 20% p.a. equally weighted. Even when controlling for market, size and style, low asset growth firms outperformed high asset growth firms by 13% p.a. Therefore a company with fast asset growth may underperform.
Total Assets is linked to total revenue through Asset Turnover:
Asset Turnover = Total Sales / Total Assets
Therefore, if a company grows its assets faster than its sales, the asset turnover will decline. This might be a warning sign for the business.
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