Quick Definition

Return on Assets (ROA) is a financial ratio that measures how effectively a company uses its assets to generate profit.

Formula

Examples

• 1A company with $1 million in total assets and a net income of $100,000 has an ROA of 10%.
• 2A retail business increases its ROA by optimizing inventory management, leading to higher sales without additional asset investments.
• 3A technology firm with high asset investments but low profits may have a lower ROA, indicating less efficient use of assets.

Tags