Everything about The Return On Assets totally explained
The
Return on Assets (ROA) percentage shows how profitable a company's assets are in generating revenue.
ROA can be computed as:
» ROA = Net income / Total Assets
This number tells you "what the company can do with what it's got", for example how many dollars of earnings they derive from each dollar of assets they control. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. Return on assets gives an indication of the
capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets.
Usage
Return on assets is an indicator of how profitable a company is before
leverage, and is compared with companies in the same industry. Since the figure for total assets of the company depends on the
carrying value of the assets, some caution is required for companies whose carrying value may not correspond to the actual
market value. Return on assets is a common figure used for comparing performance of
financial institutions (such as
banks), because the majority of their assets will have a carrying value that's close to their actual market value. Return on assets isn't useful for comparisons between industries because of factors of scale and peculiar capital requirements (such as reserve requirements in the insurance and banking industries).
Return on assets is one of the elements used in financial analysis using the
Du Pont Identity.
Further Information
Get more info on 'Return On Assets'.
|
External Link Exchanges
Do you know how hard it is to get a link from a large encyclopaedia? Well we're different and will prove it. To get a link from us just add the following HTML to your site on a relevant page:
<a href="http://return_on_assets.totallyexplained.com">Return on assets Totally Explained</a>
Then simply click through this link from your web page. Our crawlers will verify your link, extract the title of your web page and instantly add a link back to it. If you like you can remove the words Totally Explained and embed the link in article text.
As long as your link remains in place, we'll keep our link to you right here. Please play fair - our crawlers are watching. Your site must be closely related to this one's topic. Any kind of spamming, dubious practises or removing the link will result in your link from us being dropped and, potentially, your whole site being banned. |
