Return on assets

Return on assets (ROA) is a financial ratio that measures a company's ability to generate profits from its assets. ROA is calculated by dividing a company's net income by its total assets. This ratio shows how efficiently a company is using its assets to generate profits. ROA is expressed as a percentage, with a higher percentage indicating that a company is generating more income per dollar of assets.

For example, if a company has $100,000 in net income and $1 million in total assets, its ROA would be 10% ($100,000 / $1 million). ROA can be used to compare the performance of different companies in the same industry or to track a company's performance over time. A higher ROA generally indicates that a company is more profitable and efficient, while a lower ROA can indicate that a company is struggling to generate profits from its assets. It's important to note that ROA should be used in conjunction with other financial ratios and metrics to get a complete picture of a company's financial health. Other factors, such as debt levels, profit margins, and industry trends, can also impact a company's financial performance.