Return on Assets


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Return on Assets formula is:

 Return on Assets formula


Definitions and terms used in Return on Assets Calculator

Net Income
The income that a company has after subtracting costs and expenses from the total revenue. Net income is sometimes called the bottom line.
Also known as earnings, net earnings or net profit.
Total Assets
The economic resources owned by a business. The assets are divided in two major classes: tangible assets (physical resources) and intangible assets (non-physical resources and rights like goodwill, copyrights, trademarks and patents). In order to have a more accurate figure of return on assets it is recommended to use average total assets.

What is Return on Assets

Return on Assets (ROA) is an indicator of how profitable company’s assets are in generating profit.

Return on Assets formula is:

 Return on Assets formula

Return on Assets shows how many dollars of earnings result from each dollar of assets the company controls.

Return on Assets Analysis

Return on Assets ratio gives an idea of how efficient management is at using its assets to generate profit.

Return on Assets can vary substantially across different industries. This is the reason why it is recommended to compare it against company’s previous values or the return of a similar company.

The only common rule is that the higher return on assets is, the better, because the company is earning more money on its assets.

low return on assets compared with the industry average indicates inefficient use of company’s assets.

Return on Assets is one of the profitability ratios and is usually expressed as a percentage.