Eccentricity (mathematics): Difference between revisions
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The '''return on assets''' ('''ROA''') percentage shows how [[Profit (accounting)|profitable]] a company's [[asset]]s are in generating [[revenue]]. | |||
ROA can be computed as: | |||
:<math>\mathrm{ROA} = \frac{\mbox{Net Income}}{\mbox{Average Total Assets}}</math><ref name="isbn0-618-73661-1">{{cite book |author=Susan V. Crosson; Belverd E., Jr Needles; Needles, Belverd E.; Powers, Marian |title=Principles of accounting |publisher=Houghton Mifflin |location=Boston |year=2008 |page=209 |isbn=0-618-73661-1}}</ref> | |||
This number tells you what the company can do with what it has, ''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. ROAs over 5% are generally considered good. | |||
==Usage== | |||
Return on assets is an indicator of how profitable a company is before [[Leverage_(finance)|gearing]]. | |||
Return on assets is one of the elements used in financial analysis using the [[Du Pont Identity]]. | |||
==See also== | |||
*[[Rate of return on a portfolio]] | |||
*[[Return on capital]] | |||
*[[List of business and finance abbreviations]] | |||
*[[Return on investment]] (ROI) | |||
==References== | |||
{{reflist}} | |||
==External links== | |||
*[http://www.investopedia.com/terms/r/returnonassets.asp Return On Assets - ROA] | |||
{{Financial ratios}} | |||
[[Category:Financial ratios]] | |||
Revision as of 18:43, 12 November 2013
The return on assets (ROA) percentage shows how profitable a company's assets are in generating revenue.
ROA can be computed as:
This number tells you what the company can do with what it has, 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. ROAs over 5% are generally considered good.
Usage
Return on assets is an indicator of how profitable a company is before gearing.
Return on assets is one of the elements used in financial analysis using the Du Pont Identity.
See also
- Rate of return on a portfolio
- Return on capital
- List of business and finance abbreviations
- Return on investment (ROI)
References
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