ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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RETURN ON ASSETS Definition
RETURN ON ASSETS (ROA) shows the after tax earnings of assets. Return on assets is an indicator of how profitable a company is. Use this ratio annually to compare a business performance to the industry norms: The higher the ratio the greater the return on assets. However this has to be balanced against such factors as risk, sustainability and reinvestment in the business through development costs.
Higher ROA is better, but extremely high ROA may be an indicator of vulnerability as to any sustainable competitive advantage.
Formula: Earnings After Tax (EAITDA) / Total Assets
Learn new Accounting Terms
SUSPENSE ACCOUNT, in accounting, is an account that is used on a temporary basis for receipts, disbursements, or discrepancies until such time as the analysis is complete and they can be properly classified.
ASSET STRIPPING is buying a business and then realizing a profit by selling off the assets separately.