The Return on Assets (ROA) percentage shows how profitable a company's assets are in generating revenue.

ROA can be computed as:

ROA = EBIT / Total Assets = (Earnings Before Interest and Taxes / Sales) * (Sales / Assets )

This number tells you "what the company can do with what it's got", i.e. how many dollars of earnings they derive from each dollar of assets they control. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. Return on assets gives an indication of the capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets. Earnings before interest and taxes (EBIT), also known as operating income and operating profit, is a term used to describe a companys earnings. ... In business and accounting an asset is anything owned which can produce future economic benefit, whether in possession or by right to take possession, by a person or a group acting together, e. ...

Usage

Return on assets is an indicator of how profitable a company is before leverage, and is compared with companies in the same industry. Since the figure for total assets of the company depends on the carrying value of the assets, some caution is required for companies whose carrying value may not correspond to the actual market value. Return on assets is a common figure used for comparing performance of financial institutions (such as banks), because the majority of their assets will have a carrying value that is close to their actual market value. In finance, Gearing is defined as the ratio between long-term debt to the shareholders funds on a companys balance sheet. ... In accounting and finance, the carrying value or carry value of an asset is the amount reported as the assets current nominal worth for accounting purposes. ... Market capitalization, often abbreviated to market cap, mkt. ... In Financial economics, a financial institution acts as an agent that provides financial services for its clients. ... “Banker” redirects here. ...

Return on assets is one of the elements used in financial analysis using the Du Pont Identity. and be impacted by inventory directly. The Du Pont Identity (also known as Du Pont analysis or Dupont analysis) is an expression which breaks ROE (Return On Equity) into three parts. ...

See also

• Return on capital
• List of business and finance abbreviations

Return on capital, also known as Return On Invested Capital (ROIC) is defined as NOPLAT / Invested Capital usually expressed as a percentage. ... This is a list of business and finance abbreviations. ...

External links

• Return On Assets - ROA