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Calculate ROA for Wilson Swimwear, when:
Calculate beginning total assets for Theo’s Florist, when:
This ratio measures the value of profits generated by the total value of assets of a business during a financial year. This ratio tells investors and analysts how efficiently a business uses its assets to generate net income. It is a profitability ratio. Literally, RoA indicates the number of cents earned by each dollar of asset value.
Higher return on assets values show that a business is more profitable. This ratio should be only used to compare companies in the same industry. Companies in some industries need more expensive plant and equipment to generate income than others. Increasing RoA trends indicate that a company’s profits are improving. Conversely, a decreasing trend means that profitability is falling.