Return on assets ( English return on assets, ROA ) is a financial indicator that reflects the efficiency of using the company's assets to generate revenue .
ROA is one of the elements in the DuPont model .
Calculation Formula
ROA = ( Net Profit / Average Asset Value) * 100% ,
where net profit is the profit and loss statement indicator, average asset value is the sum of assets at the beginning and at the end of the year divided in half (calculated on the basis of balance sheet indicators).
In practice, other options are sometimes used, for example:
ROA = ( Operating Profit / Average Asset Value) * 100%
This indicator characterizes the profit received by the enterprise from each ruble spent on the formation of assets. It makes sense to compare the values of this indicator only between enterprises of the same industry, with a plan-factor analysis of the company’s activities or with an analysis of the change in the value of the indicator over time.
See also
- Profitability
- Return on investment