Return on Assets Calculator

Return on Assets (ROA) mean?

Accounting ratios can be used to measure performance by any company. There are many types of accounting ratios, and the beneficial ratio is one of them. The beneficial ratio is how much profitability a company has or how profitable any company is. Profitability implies the capability of the company to earn profit or is capable of making profits.

It is a profitability ratio known as return on assets (ROA). ROA is the return on assets, as it’s called. We know how many types of assets are used in any company, so any company is using several assets in its business, i.e., the purpose of these assets is they are using to generate income from these assets, then we get to know this thing from ROA. Given that ROA is the ratio of the profit earned from assets used by the company, it is viewed better the higher the ROA, even if the assets were not used properly, or how well they were used to generate income. The better we use the assets to earn income, the higher the ROA.

The formula of ROA is. ROA = Net Income / Average Total Assets. That means the net income equals the total assets, and so the value of what we have invested in the business, in terms of assets, is equal to the value of the income we have earned. Then we know if it’s more than 1, it’s good. This is to say that we’ve made more dollars in income than the assets we’ve put into (it’s the other way around). For example, if the ROA here is 1.5, we have earned $1.5 for every $1 of assets invested in the business. If it is less than 1 (such as 0.5 or 0.1), it is not so good. This means we have invested $1, but in terms of that, we are earning 0.5 or 0.1. This is actually about (ROA) Return on Assets.