When using the first formula, average total assets are usually used because asset totals can vary throughout the year. A higher return on assets ratio indicates that the company is able to generate more income from the given amount of assets. A company which has a total debt of $20 million out of $100 million total asset, has a ratio of 0.2. Income Statement's Formula. Net income = revenues - expenses. Price-earnings ratio = Earnings per share 7. Of all the assets that a company owns (referred to as total assets), analysts want to know what percentage of them are actually generating income. Debt to asset indicates what proportion of a company’s assets are being financed with debt rather than equity. Debt to Asset Ratio Formula. The net interest income formula is used to calculate the amount of interest income that is left after covering interest expenses. As an example, Wells Fargo produced net income of just over $23 billion in 2015, and had total assets of $1.787 trillion at the end of the year. They determine this with the earning assets to total assets ratio. Bank analysts want to know what percentage of a company’s assets are actually generating income. Either formula can be used to calculate the return on total assets. Banks earn interest through loans, mortgages, and other similar interest earning products. Interest-Expense ratio is measured as a percentage, the lower the percentage the stronger the ratio. The _____ ratio takes this income divided by interest expense to determine the risk for creditors. The lower the percentages the better, a business or farm should be no higher than 5% to be considered strong. In banking industry another relevant ratios are : [12] Cost of deposits = Total interest paid on deposits / … The formula for dollar change for financial statement analysis is … Free Cash Flow. The Interest-Expense ratio intimates the amount of gross income that is being spent to pay the interest on borrowed money. [10] Total Income to Earning Assets = Total Income / Average earning assets * 100 [11] Risk provisions to Total income = Total of Risk provisions made during year / Total Income * 100. It is computed by taking net income divided by average total assets for the period. This ratio can also be represented as a product of the profit margin and the total asset turnover. Formula for average total asset calculation is: Free cash flow = cash provided by operations - capital expenditures - cash dividends ... (Net Income + Interest Expense + Tax Expense) / Interest Expense. Return on Total Assets Formula – Example #1. Unamortized Discount The total interest income, total interest expense, and net interest income can be found on a bank's income statement. Net Interest Income (TE) as a percent of Average Earning Assets NARRATIVE Total interest income on a tax-equiv alent basis , less total interest e xpense , divided b y the a verage of the respectiv e asset accounts involved in generating interest income. ... Debt to assets ratio = total liabilities/total assets. Income related figures are taken from income statement whereas for average total calculation, we need current and prior year’s total assets figure or in other words opening and cloing total assets. Return on assets indicates return generated by a company on its assets. 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