Enter the company’s net income ($) and the value of risk-weighted assets ($) into the Return on Risk-Adjusted Capital Calculator. The calculator will evaluate and display the Return on Risk-Adjusted Capital.
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Return on Risk-Adjusted Capital Formula
The following formula is used to calculate the Return on Risk-Adjusted Capital.
RORAC = NI / RA * 100
- Where RORAC is the Return on Risk-Adjusted Capital (%)
- NI is the company’s net income ($)
- RA is the value of risk-weighted assets ($)
How to Calculate Return on Risk-Adjusted Capital?
The following example problems outline how to calculate Return on Risk-Adjusted Capital.
Example Problem #1:
- First, determine the company’s net income ($).
- The company’s net income ($) is given as: 1780.
- Next, determine the value of risk-weighted assets ($).
- The value of risk-weighted assets ($) is provided as: 15,000.
- Finally, calculate the Return on Risk-Adjusted Capital using the equation above:
RORAC = NI / RA * 100
The values given above are inserted into the equation below and the solution is calculated:
RORAC = 1780 / 15,000 * 100 = 11.866 (%)
Example Problem #2:
For this problem, the variables needed are provided below:
company’s net income ($) = 700
value of risk-weighted assets ($) = 20,000
This example problem is a test of your knowledge on the subject. Use the calculator above to check your answer.
RORAC = NI / RA * 100 = ?
