Return on Assets (ROA)
What it is:
Return on assets measures the amount ofthe company generates as a percentage of the value of its total assets.
How it works (Example):
A company's return on assets (ROA) is calculated as the ratio of itsin a given period to the total value of its assets. For instance, if a company has $10,000 in total assets and generates $2,000 in , its would be $2,000 / $10,000 = 0.2 or 20%.
Why it Matters:
The analysts should in mind that the does not account for outstanding liabilities and may indicate a higher level than actually derived.percentage of assets varies by industry, but in general, the higher the ROA the better. For this reason it is often more effective to compare a company's to that of other companies in the same industry or against its own figures from previous periods. Falling ROA is almost always a problem, but investors and