What financial metric assesses a company's effective use of total assets?

The financial metric that assesses a company's effective use of total assets is Return on Total Assets (ROTA). This measure evaluates how efficiently a company can generate profit from its total assets. ROTA is calculated by dividing the net income by the total assets, providing insight into the profitability of the firm relative to its asset base.

When a company has a high return on total assets, it indicates that it is effectively using its assets to produce earnings. This metric is essential for understanding how well management turns investments in assets into profits, making it a crucial indicator for investors and analysts assessing operational efficiency.

In contrast, while Return on Capital Employed focuses on the returns generated from capital rather than total assets, and Return on Equity measures profitability relative to shareholders' equity, neither specifically addresses the efficiency in leveraging total assets for profits. Profit Margin, on the other hand, relates to how much profit a company makes for each dollar of revenue but does not reflect asset utilization. Therefore, Return on Total Assets is indeed the most relevant metric for evaluating a company's effective use of total assets in generating earnings.