The Return on Assets Calculator is a tool intended to assist you in calculating ROA, which is one of the most commonly used ratios in the business of the company. But, do you want to learn more about it, do you need some form of financial assistance or do you need help for your company? Then, you’ve come to the right location! What is asset return and, more importantly, what is a good asset return? And, of course, how do you measure asset return, which formula to use? These are important questions to consider in relation to this subject.

We also recommend that you visit our page for more financial calculators: Price Elasticity of Demand, Real Rate of Return, or Enterprise Value Calculator. There’s a whole section just for finance-related calculators used in everyday life, so don’t hesitate to take a look.

What is Return on Assets – ROA

Perhaps the first question that comes to mind is a no-brainer: “What is the return on assets, or what is the return on assets definition?”

The return on assets (ROA) is the ratio of a companies net profit to the value of its assets. We may rate the profitability of assets this way. This metric tells us how lucrative a company is in profiting from its assets, or in other words how good a business is financial.

For example, when a company wishes to take out a loan, it is critical. In this situation, the bank will undoubtedly be interested in ROA statistics, which demonstrates how successfully the firm will spend the borrowed funds in their business activities. ROA is useful to determine if the companies sales and asset management strategies need some new strategies.

Return on Assets Formula

Are you curious to know how to calculate return on assets value, or how to find return on assets? Look at the return on assets equation:

ROA=\frac {Net \; profit}{Total \; assets}\times 100 \%

Return on Assets vs Return on Equity

Return on equity (ROE) measures how management uses its assets or resources to create more revenue, whereas the return on assets (ROA) measures how management uses its assets or resources to generate more income.

ROE is net income divided by stockholders’ equity, whereas Return on Assets (ROA) is net income divided by average assets.

Higher ROE does not imply that the firm is performing well. The ROA is a more accurate indicator of a companies financial performance. Higher ROE, along with a higher ROA and manageable debt, results in reasonable earnings.

Return On Assets Calculator – How to Use?

Since you now know that ROA is the ratio between net profit and total asset value, deriving the formula is easy. The two variables we talked about earlier, net profit and total assets, are mandatory. After that, the calculator will calculate itself.

So:

  • Input net profit value;
  • Input total assets;
  • Now enjoy.

Return on Assets: Importance

The return on investment (ROI) number tells investors how well a firm convert its investments into profit. The higher ROI, the better, because the firm may generate more money with less investment. Simply said, a higher ROA indicates greater asset efficiency.

Return On Assets Calculator – Example

Now you will see that this is very easy to master, look at our return on assets example. Let’s say your income is 10,000 and your assets are 8,000. As we said by the formula:

ROA=\frac {10,000}{8,000}\times100\%= 1.25\%

FAQ

How to calculate return on assets?

Are you curious how is a return on assets is calculated?
We have the return on investment (ROI) by dividing a net of company income by the average of its total assets. It’s then converted into a percentage. Use this formula: ROA= (Net \; profit \div Total \; assets) \times 100 \% .

What is a good return on assets?

A return on investment that is more than 5% is regarded as acceptable, while more than 20% is considered great.

What is the average return on assets?

The term “average total assets” is used to refer to the total assets of a company during the previous and current accounting periods. Companies must compute the average total assets in order to assess how well they are employing their assets.

What is a bad return on assets?

A low ROA suggests that the firm cannot maximize the value of its assets to increase earnings. This is because it demonstrates that the firm is successfully utilizing its assets in order to increase net income.

What does a return on assets of 15% represent?

For every $100 invested in assets, the company earns $15 in net income.

What is the return on assets ratio?

The return on assets ratio, or also known as the return on total assets, is a profitability ratio that compares net revenue to average total assets to determine total assets’ net income over a period of time. This ratio, in a nutshell, determines how profitable assets from the company are.

What are total assets are equal to?

The sum of long-term and short-term assets is the total assets. That sum should be equal to total liabilities plus share capital.