Return On Assets (ROA)

The net income divided by average total assets. ROA can vary widely among companies and is a measure of a company´s effectiveness in using the assets at hand in generating earnings. For example, financial institutions with a large amount of assets will typically have ROAs slightly greater than 1% whereas a software company that is less asset intensive may have a much higher ROA. ROA really depends upon the amount of assets necessary for the company to conduct business. Unlike ROE, ROA ignores a company´s liabilities.