Return on Assets (ROA) - Meaning, Formula, Assumptions and Interpretation
Another metric that is widely used by investors to gauge the profitability of a company is Return on Assets (ROA). More about this very important ratio has been stated in this article.
Formula
Return on Assets = Earnings / Asset Base
Meaning
The Return on Assets (ROA) ratio shows the relationship between earnings and asset base of the company. The higher the ratio, the better it is. This is because a higher ratio would indicate that the company can produce relatively higher earnings in comparison to its asset base i.e. more capital efficiency.
Assumptions
Interpretation
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Authorship/Referencing - About the Author(s)
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