Computing Return on Operating Asset
Hi, im currently a student studying banking and finance. Sorry to kind of hijack this forum to ask a question as i cant find any answers online.
I was taught that Return on Operating Asset (ROOA) = (Operating Income + Implicit interest/Short-term borrowing cost) / Operating Assets.
I’m still confused as to why the cost of implicit interest is Added to Operating income in order to compute ROOA instead of minus?
Any help will be greatly appreciated!