Return On Assets (ROA)
Returns the Return on Assets for a company, which measures how efficiently management uses assets to generate earnings.
ROA = Net Income / Total Assets
Interpretation
| Range | Interpretation |
|---|---|
| > 15% | Excellent asset efficiency |
| 10% - 15% | Good efficiency |
| 5% - 10% | Average efficiency |
| < 5% | Low efficiency or asset-intensive industry |
Industry Considerations
| Industry | Typical ROA |
|---|---|
| Technology | 10-25% |
| Consumer goods | 8-15% |
| Banks | 0.5-2% |
| Utilities | 2-5% |
Notes
- Asset-heavy industries (banks, utilities) typically have lower ROA
- Compare within the same industry for meaningful analysis
- Consider alongside ROE for complete picture
Examples
=ReturnOnAssets("AAPL")=ReturnOnAssets("MSFT")=ReturnOnAssets("JPM")=ReturnOnAssets(A1)=ReturnOnAssets("AAPL")*100When to Use
- Evaluating management efficiency
- Comparing companies in the same industry
- Screening for efficient capital allocation
- Asset-intensive industry analysis
- Understanding profitability drivers
When NOT to Use
| Scenario | Use Instead |
|---|---|
| Shareholder return analysis | ReturnOnEquity() |
| Capital allocation efficiency | ReturnOnInvestedCapitalOneYear() |
| Historical ROA data | hf_ReturnOnAssets() |
| Operating profitability | operating_margin() |
Common Issues & FAQ
Q: Why do banks have such low ROA? A: Banks are highly leveraged, holding vast assets relative to equity. A 1% ROA for a bank is considered good because leverage amplifies returns to shareholders.
Q: What's the difference between ROA and ROE? A: ROA measures profit relative to total assets. ROE measures profit relative to shareholder equity. Companies with high debt have much higher ROE than ROA.
Q: Why is ROA returned as a decimal? A: The value is a decimal (e.g., 0.15 = 15%). Multiply by 100 for percentage format.
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