Total AssetsView All Terms
Total 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.