Return on Assets (ROA) Calculator
Measure your company's efficiency in using its assets to generate profit.
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ROA Formula
Return on Assets (ROA) is a financial metric that measures a company's efficiency in using its assets to generate profit. It shows how effectively a company is using its assets to generate earnings.
How to Calculate ROA
To calculate ROA, follow these steps:
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1Determine the net income from your income statement
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2Find the total assets from your balance sheet
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3Divide net income by total assets
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4Multiply by 100 to get the percentage
Interpreting ROA
ROA is a key metric for evaluating a company's operational efficiency and profitability. Here's how to interpret different ROA values:
- ROA > 10%: Excellent performance, indicating strong asset utilization and profitability.
- ROA 5-10%: Good performance, showing effective use of assets to generate profit.
- ROA 2-5%: Average performance, suggesting room for improvement in asset utilization.
- ROA < 2%: Below average performance, indicating potential issues with asset utilization.
- Negative ROA: Poor performance, suggesting the company is not efficiently using its assets to generate profit.
ROA - Practical Examples
Example 1 High-Performing Company
A company with a net income of $200,000 and total assets of $1,500,000.
ROA = ($200,000 / $1,500,000) × 100% = 13.33%
Example 2 Average-Performing Company
A company with a net income of $100,000 and total assets of $2,000,000.
ROA = ($100,000 / $2,000,000) × 100% = 5%
Example 3 Struggling Company
A company with a net loss of $50,000 and total assets of $1,000,000.
ROA = (-$50,000 / $1,000,000) × 100% = -5%