Return on Assets (ROA)
How efficiently does a company use its total assets to generate profit?
Definition
ROA measures how much profit a company generates per dollar of assets. Unlike ROE, it is unaffected by capital structure (debt vs equity financing).
Formula
Where:
- Net Profit: Operating-level net profit (before non-operating items)
- Total Assets: Sum of all assets on the balance sheet
Interpretation
| Range | Assessment |
|---|---|
| > 10% | Highly efficient asset utilization |
| 5% – 10% | Good |
| < 5% | Asset-heavy business or low profitability |
Asset-light businesses (software, consulting) typically show higher ROA than asset-heavy industries (manufacturing, utilities).
Industry Routing
Available for all industries.
In Finsco
Computed by the audit returns command.