Published: 20 February 2024
Traditional methods to improve return on assets — a far bigger driver of shareholder returns than revenue growth or margin — yield subpar results. Learn how leading CFOs improve ROA by identifying and deploying opex-funded intangibles called “pseudo assets.”
Although return on assets (ROA) is a stronger driver of total shareholder returns (TSR) than revenue growth and EBITDA margin, CFOs largely limit ROA improvement efforts to current asset turnover optimization.
Outperforming competitors on ROA requires CFOs to identify and deploy pseudo assets to improve asset productivity. Pseudo assets are operating expense (opex)-funded intangible assets, such as proprietary algorithms or homegrown skills, that maximize the productivity of value-creating assets.
Companies that effectively exploit their pseudo assets drive up to 2.7 times higher ROA outperformance than companies that take a standard approach, underscoring the need for CFOs to use pseudo assets
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Analysts:
Idris Evans, Namrata Menon
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