RETURN ON ASSETS Definition

Bookmark and Share

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

COMPANY LIMITED BY SHARES is where the members' personal liabilities are limited to the par value of their shares. a company limited by guarantee.

PARENT ENTITY see PARENT COMPANY.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.