What is Roa & how does it work?

Corporate management, analysts, and investors can use ROA to determine how efficiently a company uses its assets to generate a profit. The metric is commonly expressed as a percentage by using a company's net income and its average assets.

What is return on assets (ROA)?

Return on assets (ROA) is a measure of how efficiently a company uses the assets it owns to generate profits. Managers, analysts and investors use ROA to evaluate a company’s financial health. Return on Assets: What Is ROA? Return on assets compares the value of a business’s assets with the profits it produces over a set period of time.

How do you know if a company's Roa is good?

To determine a solid ROA, you’ll want to review the average ROA in a company’s specific industry (generally, a company's ROA should be within the same range as its competitors). If the average ROA for the manufacturing industry is 7% – and a company’s ROA you’re examining is 8.2% – they’re doing well with their asset management.

How accurate is Roa?

When you divide the company’s net profit of $2,500,000 by $33,500,000, you get a ROA of 7.46%. This ROA is more accurate than the 6.49% figure in the example above. ROA is a helpful metric for gauging a single company’s performance.