Editing Return on assets

{{Short description|The percentage of how profitable a company's assets are in generating revenue}}
The '''return on assets''' ('''ROA''') shows the percentage of how [[Profit (accounting)|profitable]] a company's [[asset]]s are in generating [[revenue]].

ROA can be computed as below:

:<math>\mathrm{ROA} = \frac{\mbox{Net Income}}{\mbox{Average Total Assets}}</math><ref name="isbn0-618-73661-1">{{cite book |author1=Susan V. Crosson |author2=Belverd E. Needles, Jr. |author3=Belverd E. Needles |author4=Powers, Marian |title=Principles of accounting |publisher=Houghton Mifflin |location=Boston |year=2008 |page=209 |isbn=978-0-618-73661-4}}</ref>

The phrase '''return on average assets (ROAA)''' is also used, to emphasize that average assets are used in the above formula.<ref>{{cite web|url=https://www.investopedia.com/terms/r/roaa.asp|title=Return on Average Assets (ROAA): Definition and How It's Used|first=Will|last=Kenton|website=Investopedia|access-date=2023-04-21}}</ref>

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]] (ROE)
*[[List of business and finance abbreviations]]
*[[Rate of return on a portfolio]]
*[[Return on brand]] (ROB)
*[[Return on capital]] (ROC)
*[[Return on investment]] (ROI)
*[[Weighted average return on assets]] (WARA)

==References==
{{reflist}}

==External links==
*[http://www.investopedia.com/terms/r/returnonassets.asp Return On Assets - ROA]

{{Financial ratios}}

[[Category:Financial ratios]]
[[Category:Investment indicators]]