Overview

Return on assets (ROA) is a financial metric used to assess how profitable a company is in relation to its total assets. It is a type of return on investment (ROI) measure that indicates how well the company utilizes its assets in generating income. The formula for calculating the return on assets is as follows:

ROA = Net Income / Average Assets

or

ROA = Net Income / End of Period Assets

Companies in different industries will likely have very different ROA requirements. For capital-intensive industries that usually invest in a large amount of fixed assets (e.g. PP&E) for their daily operations, companies tend to have a lower ROA. It is important to compare the ROA of companies with similar characteristics and operate in the same industry for apple-to-apple comparisons.

Share
Reviews Add a review
No reviews yet

More From Corporate Finance Institute®

Browse our top rated business templates. See All
REIT Financial Model Template
156
0
This REIT financial model template acts as a guideline for modeling a real estate investment trust (REIT). This model will…
Energy Industry Comps Template Energy Industry Comps Template
1,010
62
This energy industry comps template provides a guideline and example of what a comparables universe would look like for a…
Financial Institution Dividend Discount Model
1,617
71
The financial institution dividend discount model uses future dividends to find the implied share price. This model is based on…
Loan Payment Calculator
1,320
0
The loan payment calculator allows users to determine the principal and interest payment each month until the full balance of…
DDM - Excel Dividend Discount Model Template
1,454
105
The dividend discount model template allows investors to value a company base on future dividend payments. This is based on…
Non-directional trading strategy template Non-directional Trading Strategies Template
1,224
0
The non-directional trading strategies template allow users to determine the profit when buying options. This template focuses on non-directional strategies…
See All