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Return on assets ratio calculator
The return on assets ratio measures how well a company's management team is doing its job. A comparison of net income and average total assets, the ROA ratio reveals how much income management has been able to squeeze from each dollar's worth of a company's assets. Investors and potential investors use this ratio to evaluate a company's leadership.
Many companies, particularly those involved in manufacturing and selling seasonal goods, experience wide swings in assets during the course of a year. To accommodate for these swings and produce a more accurate ratio, the total assets figure used to calculate the ROA should be an average of a firm's assets at the beginning and end of the statement period.
A return on assets ratio of 0.06:1 would mean the company is pulling in six cents for each dollar of assets.
Like most business ratios, you can learn the most from this one when you compare it to your ROA ratios from previous years and with the industry norms.