Return on Assets

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Definition

Return on Assets (ROA) shows the rate of return (after tax) being earned on all of the firm's assets regardless of financing structure (debt vs. equity). It is a measure of how efficiently the company is using all stakeholders' assets to earn returns.

Because ROA can differ significantly across firms, ROA is often used to compare a company over time or against companies that have similar financing structures.

Formula

The most common accounting definition for Return on Assets is:

Return on Assets (ROA) = [Net Income + (Interest Expense x (1 - Tax Rate)) + Minority Interest) / (Average Total Assets)

Where Average Total Assets = (Assets at the beginning of the reporting period + Assets at the end of the reporting period) / 2

YCharts calculates Return on Assets as:

ROA = Trailing 12 Month Net Income / Total Assets from the most recent quarter

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