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Metric · Profitability

Return on Assets (ROA) Explained

Return on assets (ROA) measures how much profit a company generates relative to its total balance sheet, regardless of whether the capital comes from equity or debt.

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Updated 20266 min read
Formula
ROA = Net income ÷ Total assets × 100
> 10%High capital efficiency
5–10%Solid capital efficiency
< 5%Low capital efficiency
Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator
Net income
The after-tax profit from the income statement.
Denominator
Total assets
The company's entire asset base, current plus fixed assets.

Calculator

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Result ROA
Solid capital efficiency
8.6 %
1
An ROA above 10% is considered strong capital efficiency, below 5% weak. Again, the industry-typical value varies significantly.
2
Unlike ROE, ROA can't be inflated by leverage, since it uses total assets rather than just equity as its base.
3
Comparing ROE and ROA shows how strongly debt leverage affects a company's return on equity.
4
A rising ROA over several years points to increasingly productive use of capital.

Used in these strategies

Piotroski F-Score (9-Point Check)Nine hard balance-sheet criteria: separating substance from downward spirals.Mohanram G-Score: Growth QualityThe substance check for growth stocks: separates investment from hot air.

Frequently asked questions

ROE relates only to equity and can be boosted by leverage. ROA includes total assets (equity plus debt) and is therefore less susceptible to distortion from debt levels.
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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.

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