Return on Assets financial definition of Return on Assets. Return on Assets finance term by the Free Online Dictionary.

Return on assets (ROA)

Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets).

Rate of Return

In securities, the amount of revenue an investment generates over a given period of time as a percentage of the amount of capital invested. The rate of return shows the amount of time it will take to recover one's investment. For example, if one invests $1,000 and receives $150 in the first year of the investment, the rate of return is 15%, and the investor will recover his/her initial $1,000 in six years and eight months. Different investors have different required rates of return at different levels of risk.

return on assets (ROA)

See return on investment.

Return on Assets (ROA)

What Does Return on Assets (ROA) Mean?

An indicator of how profitable a company is relative to its total assets. ROA provides an idea of how efficient management is at using its assets to generate earnings. It is calculated, as shown here, by dividing a company's annual earnings by its total assets, with ROA displayed as a percentage. Sometimes this is referred to as return on investment.

Note: Some investors add interest expense back into net income when performing this calculation because they would like to use operating returns before the cost of borrowing.

Investopedia explains Return on Assets (ROA)

ROA shows earnings that are generated from invested capital (assets). ROA for public companies can vary substantially and is industry-specific. Thus, when one is using ROA as a comparative measure, it is best to compare it with a company's previous ROA numbers or the ROA of a similar company. A company's assets consist of both debt and equity, which are used to fund the operations of the company. ROA gives investors some idea of how effectively the company is converting the money it has into net income. The higher the ROA, the more a company earns on a smaller investment. For example, if one company has a net income of $1 million and total assets of $5 million, its ROA is 20%. If another company earns the same amount but has total assets of $10 million, it has an ROA of 10%. In this scenario, the first company is doing a better job of converting its investments into profit. When one thinks about it, this is management's ultimate job: to make wise choices in allocating company resources. Anybody can make a profit by throwing a ton of money at a problem, but very few managers excel at making large profits with a small investment.

Related Terms:
• Assets
• Earnings
• Profitability Ratios
• Return on Equity—ROE
• Return on Net Assets—RONA

Mentioned in	?		References in periodicals archive	?		Financial browser	?		Full browser	?
Absolute Return capital gain Dividend Yield DuPont System of Financial Control Earning Power Expected Return Profitability Ratios Refund Required Rate of Return return on equity return on investment Return on Net Assets Risk-Adjusted Return ROA ROE	The study, which examined 654 FTSE All-Share companies in 2003-07, revealed that a breach of governance best practice reduced a business's industry-adjusted return on assets (ROA) by an average of one percentage point a year. Conformers are top performers by Financial Management (UK) How to Measure Operational Excellence Manufacturers of medical products are asset-based companies; therefore, operational excellence should be measured in terms of the return on assets a firm generates. Operational excellence: setting the target for performance by Jacobs, Bruce E. / Medical Product Outsourcing But UFJ Central's relatively lower return on assets and weaker capitalization indicate that the newly merged company's financial profile may be lower than that of Diamond Lease at present, the debt rating agency said. S&P affirms Diamond Lease's A-minus ratings after merger agreement by Japan Weekly Monitor	Retirement Protection Act of 1994 Retirement Relief Retiring a Bill Retiro Retiro automatico Retorno actual Retorno ajustado por exposicion a un riesgo Retorno esperado Retorno libre de riesgo Retorno nominal Retorno sobre la inversion Retorno sobre las ventas Retorno sobre o investimento Retorno superior al mercado Retorno total Retracao do credito Retracement Retractable Bond retreatment bond Retribuzione annua garantita retrospective appraisal Return Return If Exercised Return of Capital Return of Capital Distribution Return on Assets Return on Capital Employed Return on Capital Gains Return on Common Equity Return on Common Stock Equity return on equity Return on Gross Invested Capital return on investment Return on Investment Capital Return on Net Assets Return On Revenue Return on Sales Return on Total Assets Return-to-maturity expectations Returned Without Action Reu Reuters Revaluation revaluation clause revaluation lease revaluation or reevaluation Revaluo Revenu des investissements Revenu disponible Revenu du capital dividends Revenu gagne	Return of service Return of service Return of service Return of service Return of Service Obligation return of spontaneous circulation return of spontaneous circulation Return of the Champions Return of the Dead Return of the Dragons Return of the Heraclids Return of the Heraclids Return Of The Jedi Return Of The Jedi Special Edition Return of the Jets Return of the Joker Return of the King Return Of The Living Acid Return of the living dead Return of the Mack Return of the Member Return of the Rentals Return of the Robin Return of the Warlord Return of Withdrawn Blood Return of writs return offset Return on Advertising Spending Return On Allocated Capital Return on Assets Return On Assets Managed Return on Average Assets Return on Average Common Equity Return on Average Equity Return on Average Invested Capital Return on Average Net Worth Return on Brand Investment Return on capital Return on capital Return on capital Return on capital Return on capital employed Return on capital employed Return on Capital Equity Return on Capital Gains Return on Capital Invested Return on Capital, Risk Adjusted Return on Capital, Risk-Adjusted Return on Common Equity Return on Common Shareholders Equity return on common stock equity Return on Customer Relationship Return On Debt Return on Economic Capital Return On Economic Equity Return on Education Investment Return on Energy Investment Return on equity Return on equity Return on equity

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Absolute Return
capital gain
Dividend Yield
DuPont System of Financial Control
Earning Power
Expected Return
Profitability Ratios
Refund
Required Rate of Return
return on equity
return on investment
Return on Net Assets
Risk-Adjusted Return
ROA
ROE

The study, which examined 654 FTSE All-Share companies in 2003-07, revealed that a breach of governance best practice reduced a business's industry-adjusted return on assets (ROA) by an average of one percentage point a year.

Conformers are top performers by Financial Management (UK)

How to Measure Operational Excellence Manufacturers of medical products are asset-based companies; therefore, operational excellence should be measured in terms of the return on assets a firm generates.

Operational excellence: setting the target for performance by Jacobs, Bruce E. / Medical Product Outsourcing

But UFJ Central's relatively lower return on assets and weaker capitalization indicate that the newly merged company's financial profile may be lower than that of Diamond Lease at present, the debt rating agency said.

S&P affirms Diamond Lease's A-minus ratings after merger agreement by Japan Weekly Monitor

Retirement Protection Act of 1994

Retorno ajustado por exposicion a un riesgo

Retorno esperado

Retorno libre de riesgo

Retorno nominal

Retorno sobre la inversion