ROA
AccountingDefinition
Return on Assets. Net income divided by total assets. Measures how efficiently a company uses its asset base to generate profits. Best for comparing companies in capital-intensive industries.
Banks: 1-2% is healthy. Industrials: 5-10%. Asset-light tech: 15-25%+. ROA × leverage = ROE — that's why banks (high leverage) can deliver healthy ROE on tiny ROA.
Banks: 1-2% is healthy. Industrials: 5-10%. Asset-light tech: 15-25%+. ROA × leverage = ROE — that's why banks (high leverage) can deliver healthy ROE on tiny ROA.
Formula
ROA = Net income / Total assets