Return on Assets interpretation
Return on Assets (ROA) is an indicator of how profitable company's assets are in generating profit. Return on assets formula is:
Return on Assets shows how many dollars of earnings result from each dollar of assets the company controls. Return on Assets ratio gives an idea of how efficient management is at using its assets to generate profit.
Return on Assets can vary substantially across different industries. This is the reason why it is recommended to compare it against company's previous values or the return of a similar company.
The only common rule is that the higher return on assets is, the better, because the company is earning more money on its assets. A low return on assets compared with the industry average indicates inefficient use of company's assets.
Return on Assets is one of the profitability ratios and is usually expressed as a percentage.
Related resource
