return on assets (ROA)
Definition
Return on assets (ROA) gauges how efficiently a company uses its assets to generate net income. It is computed by dividing net income by average total assets, then expressing the result as a percentage. ROA indicates the profit produced for each dollar invested in assets—higher values reflect superior asset utilization and operational efficiency. Because capital intensity varies by industry, ROA comparisons are most meaningful among peers in the same sector. Tracking ROA over multiple periods helps assess management’s ability to deploy resources profitably, while declines may signal under‑utilization of assets or rising costs. Investors integrate ROA with other profitability measures to form a comprehensive understanding of financial performance.
See also
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