Margin Calculator The return on assets calculator evaluates the financial performance of a company by comparing net income and the company’s total value of assets.
So, track the financial ratio of a company or a project to determine how effectively a company or a project converts its assets into earnings.
What Is ROA?
In Finance:
Return on assets is a financial ratio that represents how profitable a company is in relation to total assets.
This technique is used by analysts, business owners, and investors to see stock opportunities and to measure investment and profitability. If a company generates a high percentage of ROA, it means that it produces a high profit.
ROA Formula:
By considering the net income and the total assets, we can gain the return on assets. Net income can be found at the bottom of the income statement of a company, and the assets are found on its balance sheet.
So, look at the formula below;
ROA = net income / total assets
If you are a buyer and want to calculate a final price after a discount, you can take the help of the discount calculator.
How To Calculate Return On Assets?
The return on total assets calculator has been created to help you calculate ROA. You can compare your company with others in the same sector by considering their annual return on total assets percentage.
For this purpose, we look forward to an example below.
Practical Example:
To find the company’s return on total assets by using its net income and average total assets, if;
Net income = $200,000
Average total assets = $18,0000
As we know the equation to find the return on assets simply divides the net income by their total assets.
ROA = net income / total assets
ROA = $200000/1800000
ROA = 0.1112
Now, we convert the company's return on total assets as a percentage
ROA = 0.1112 * 100
ROA = 11.12 %
A ROA of 11.12 % means the company earned $0.1112 for every $1 it has in return on asset ratio.
Steps To Use This Calculator:
ROA is a valuable measure that both the business owners and the investors use to estimate how competently their company generates a profit after using all assets.
Input:
- Put your net income
- Put the value of your total assets
- Tap “calculate”
Output:
- Return on investment
- Step-by-step calculations
What Is a Good Return On Assets Ratio?
ROA is always to be compared amongst the same industry. There is a simple rule that a higher ROA means that there is also a better financial condition for your company.
Generally, a 5% ROA ratio is acceptable and considered good and a 20% ROA value is excellent.
FAQs:
What Is The Indication of Negative ROA?
A negative value of return on assets indicates that a company is incurring losses. It means that a company is not generating profits.
How Many Assets Should I Have At 30?
If you are able to earn $30,000 per year then your annual salary is equal to the saving by age 30. You should have $30,000 saved on your 30th birthday.
- If you are 40 your saving is three times your income
- If you are 50 your saving is six times your income
- If you are 60 your saving is eight times your income
References:
From the source Wikipedia: ROA.
From the source Lumen Learning: Return on Assets, Example.