Average total assets vs Average total capital

What’s the difference between average total assets and average total capital ? As per the curriculum, both include Common Equity, Preferred stock, and Debts. I am a bit lost when it comes to ROA and Return on total capital.

Please help.


Total capital includes shareholders’ equity, long-term debt, and interest-bearing short-term debt. It doesn’t include short-term liabilities that do not bear interest: accounts payable, unearned revenue, etc.

Thank you S2000magician

My pleasure.

I agree to what S2000magician said but I will like to add on (from what I have read in Schweser). Under the professor’s note, it has been pointed out that total capital definition is quite subjective based on the analysts. Some analysts consider include short-term liabitilities such as account payable as a source of financing and hence include then under total capital; in which case Total Capital = Total Assets (which also = Total Liabilities + Owners’ Equity). Correct me if I’m wrong. Thanks. smiley


L+E is total capital

So what is the difference between Operating ROA vs Return on Total Capital? These ratios should equate to the same thing? No?

I’m with the professor note in Schweser: “Capital” in this context won’t have a universally accepted definition. I’d look in the glossary of your CFAI book to see how it is defined for the exam. Ditto something like “Operating ROA” , which would require a definition of “operating Income” or “Operating Assets”.

Was hoping the answer wasn’t as case by case, thanks, had a feeling it might be.