This essay focuses on Components of Return on Assets. The first of these components is the return on sales ratio and is as follows:

Components of Return on Assets

What caused Henderson’s return on assets to decrease so dramatically from the previous year? The answer can be found by considering the two components that make up the return on assets ratio. The first of these components is the return on sales ratio and is as follows:

Current assets are assets that can be easily converted into cash and cash equivalents (typically within a year). Current assets are also termed liquid assets and examples of such are:

• Cash
• Cash equivalents
• Short-term deposits
• Accounts receivables
• Inventory
• Marketable securities
• Office supplies

2. Fixed or Non-Current Assets

Non-current assets are assets that cannot be easily and readily converted into cash and cash equivalents. Non-current assets are also term fix assets, long-term assets, or hard assets. Examples of non-current or fixed assets include:

There are three key properties of an asset;

• Firstly, Ownership: Assets represent ownership that can be eventually turn into cash and cash equivalents
• Secondly, Economic Value: Assets have economic value and can be exchange or sold
• Thirdly, Resource: Assets are resources that can be use to generate future economic benefits
• Further, be smart
• Further, integrity

Classification of Assets

Assets are generally classified in three ways:

1. Convertibility: Classifying assets based on how easy it is to convert them into cash.
2. Physical Existence: Classifying assets based on their physical existence (in other words, tangible vs. intangible assets).
3. Usage: Classifying assets based on their business operation usage/purpose.