Plain-English definitions, reviewed by an independent investor

ROA (Return on Assets)

ROA shows how efficiently a company turns its assets into profit.

ROA shows how efficiently a company turns its assets into profit.

ROA = Net Income ÷ Total Assets × 100%

Why it matters

It reveals how good management is at wringing profit from what the business owns.

Common confusion

ROA varies hugely by industry; banks look nothing like software firms, so compare within a sector.

Definitions reviewed by the Investing Glossary editorial team.

Frequently Asked Questions

What is a good ROA?

Above 5% is often decent, but the right bar depends on the industry’s typical asset weight.

Why does ROA matter?

It catches companies that look profitable yet sit on lazy, unproductive assets.

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