In one sentenceNet profit divided by average total assets, measuring how efficiently the business turns the assets it owns into profit.
Simply put
It answers the question: how many riyals of profit did each 100 SAR invested in the business's assets earn? It is better to divide by average assets (start and end of the year ÷ 2), because the profit was earned over the whole year.
It is useful for comparing two branches or two businesses in the same activity, because equipment-heavy activities naturally have a lower return on assets.
Worked example
A feed factory made a net profit of 160,000 SAR, and its assets were 1,800,000 SAR at the start of the year and 2,200,000 SAR at the end.
Average assets = (1,800,000 + 2,200,000) ÷ 22,000,000 SAR
Net profit160,000 SAR
Return = 160,000 ÷ 2,000,0008%
Formula: Net profit ÷ average total assets
Don't confuse it with
Return on equityReturn on assets divides by all assets whoever financed them, and return on equity divides by the owners' share only.