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Return On Assets (ROA)

Updated: Apr 26

The term return on assets (ROA) refers to a financial ratio that indicates how profitable a company is in relation to its total assets. Corporate management, analysts, and investors can use ROA to determine how efficiently a company uses its assets to generate a profit.


The metric is commonly expressed as a percentage by using a company's net income and its average assets. A higher ROA means a company is more efficient and productive at managing its balance sheet to generate profits while a lower ROA indicates there is room for improvement.


ROA for public companies can vary substantially and are highly dependent on the industry in which they function so the ROA for a tech company won't necessarily correspond to that of a food and beverage company. This is why when using ROA as a comparative measure, it is best to compare it against a company's previous ROA numbers or a similar company's ROA.


ROA is calculated by dividing a company’s net income by its total assets. As a formula, it's expressed as:

Return on Assets = Net Income / Total Assets

Source: Investopedia, Return on Assets (ROA): Formula and 'Good' ROA Defined, accessed 25 December 2023, <https://www.investopedia.com/terms/r/returnonassets.asp>

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