The return on assets (ROA) shows the percentage of how
profitable a company's
asset
In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can b ...
s are in generating
revenue
In accounting, revenue is the total amount of income generated by the sale of product (business), goods and services related to the primary operations of a business.
Commercial revenue may also be referred to as sales or as turnover. Some compan ...
.
ROA can be computed as below:
:
The phrase return on average assets (ROAA) is also used, to emphasize that average assets are used in the above formula.
This number tells you what the company can do with what it has, ''i.e.'' how many dollars of earnings they derive from each dollar of assets they control. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. Return on assets gives an indication of the
capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets. ROAs over 5% are generally considered good.
Usage
Return on assets is one of the elements used in financial analysis using the
Du Pont Identity.
See also
*
Return on equity
The return on equity (ROE) is a measure of the profitability of a business in relation to its equity;
where:
: Jason Fernando (2023)"Return on Equity (ROE) Calculation and What It Means" Investopedia
Thus, ROE is equal to a fiscal year's net in ...
(ROE)
*
List of business and finance abbreviations
A list is a set of discrete items of information collected and set forth in some format for utility, entertainment, or other purposes. A list may be memorialized in any number of ways, including existing only in the mind of the list-maker, but ...
*
Rate of return on a portfolio
*
Return on brand (ROB)
*
Return on capital
Return on capital (ROC), or return on invested capital (ROIC), is a ratio used in finance, valuation and accounting
Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economi ...
(ROC)
*
Return on investment
Return on investment (ROI) or return on costs (ROC) is the ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favorab ...
(ROI)
*
Weighted average return on assets (WARA)
References
External links
Return On Assets - ROA
{{Financial ratios
Financial ratios
Investment indicators