A core profitability ratio that compares net income with total assets.
Published: 2026-03-21
Definition
Return on assets, or ROA, measures how much net income a company generates from its total assets.
Formula
ROA = Net Income / Total Assets
Why it matters
ROA helps investors judge how effectively management turns assets into bottom-line profit. Unlike basic earning power, ROA includes interest expense and taxes, so it reflects final profitability rather than operating performance alone.
Where to apply it
Use ROA when you want a broad profitability measure after financing and tax effects. Compare it with Basic Earning Power when you want to separate operating efficiency from leverage and tax structure.