Thursday, August 6

Return on Assets Ratio – ROA

The return on assets ratio, frequently known as the yield on total shares, has been a sustainability ratio which measures the earnings made by total shares throughout an interval by comparing net earnings to the average overall shares. To put it differently, the yield on shares ratio or ROA measures how effectively a firm may manage its shares to make benefits through a time.

Since business shares sole purpose is to generate revenues and produce benefits, this ratio helps both management and investors see how well the company can convert its investments in shares into benefits. You can look at ROA as a return on investment for the company after all capital shares are often the biggest investment for most companies. In this case, the company invests money into capital shares and the return is measured in benefits.

In short, this ratio measures how profitable a company’s shares are.

Formula

The return on shares ratio formula is calculated by dividing net income by average total shares.

Return on Assets Ratio