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Q:

# How do I calculate average total assets?

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Average total assets are calculated by adding together the value of assets at the beginning and end of an accounting period and dividing the sum by two, according to TheFreeDictionary. An accounting period is defined as the period of time reflected in the financial statements of businesses, usually a quarter or a year.

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According to TheFreeDictionary, in accounting terms, an asset is defined as anything of value owned by a company or person, including physical items such as real estate or stocks. Assets also include intangibles such as monies owed to a person or company and valuable rights such as patents.

The Business Dictionary cites an example of an average total assets calculation for a two-year period. This is calculated by first adding up the total value of assets in year one and then adding up the total value of assets in year two. The two years are then added together and divided by two.

Banks and financial institutions often use a return on average assets calculation to judge the profitability and performance of a firm, according to Investopedia. ROAA is determined by taking net income and dividing it by total average assets. The final ratio is expressed as a percentage of total average assets. This calculation offers clues into how efficiently a business utilizes its assets.

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## Related Questions

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A trial balance is used to check the accuracy of all ledger accounts normally at the end of an accounting period; the worksheet divides a company's accounts into credit and debits in an easy to read format. The balance sheet's aim is to equate the numbers in the two columns until both sections are equal, ensuring that there are no discrepancies or mathematical errors, as noted by Investopedia.

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An accounting balance sheet is a financial statement that reveals the financial position of a company at the end of a specified period, usually the last day of an accounting period. A standard accounting balance sheet has three parts: assets, liabilities and ownership capital or equity.

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Average inventory is calculated by finding the beginning and ending inventory balances at each period. These balances are summed and then divided by the total number of periods. A safety stock can be calculated as necessary.