What Is Return on Assets?
Return on assets, or ROA, shows how much profit a company makes from everything it owns. It tells you how efficiently the company uses its assets.
How to calculate ROA
Net income÷Total assets×100=ROA %
A company earns $10 million and owns $200 million of assets. Its ROA is 5%.
What is a good ROA?
It depends heavily on the industry. Banks hold huge assets, so an ROA around 1% is normal. Software companies need few assets and can reach 15% or more. Compare with similar companies.
ROA vs ROE
ROE looks only at the owners' money. ROA looks at all assets, however they were paid for. Because debt does not inflate ROA, it gives a cleaner view of the business.
See it in real companies
Open a company to see what it sells and how it makes money.
Related terms
Return on equityProfit made with the owners' money.
ROICHow well a company turns invested money into profit.
Assets and liabilitiesWhat a company owns versus what it owes.
Net incomeThe final profit after every cost.
Balance sheetShows what a company owns and owes.
Profit marginHow many cents of profit from each dollar of sales.