Return on assets (ROA)
Financial Accounting glossary · Financial Statement Analysis & Ratios
Definition
Net income / average total assets; measures asset productivity in generating earnings.
Return on assets (ROA) in plain English
Return on assets answers: for every dollar of stuff a company owns, how much profit does it squeeze out? You take the year's profit and divide it by the company's average total assets (all its buildings, cash, equipment, and so on). A higher ROA means the business is a more efficient money-making machine — like two food trucks with identical kitchens, where the one earning more profit is simply using its gear smarter. It lets you compare how well different companies turn what they own into actual earnings, regardless of their size.
Also called: ROA
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