Return on Assets (ROA)

Return on Assets (ROA) is a financial metric that measures how efficiently a company uses its assets to generate profit. It is calculated by dividing the net income by the total assets. A higher ROA indicates that a company is effectively turning its investments in resources, like equipment and buildings, into earnings. Essentially, it shows how well a company is managing its assets to create wealth for its shareholders. Investors often use ROA to compare profitability between companies in the same industry, as it highlights operational efficiency.