Return on assets

Return on Assets (ROA) 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.

The formula for ROA is:

Return on Assets = Net income / Total assets