What is Return on Assets (ROA)?

Return on Assets (ROA) is an indicator that is used to determine how profitable a company is relative to its total assets. This metric allows companies and other organizations to determine how efficiently their assets are being leveraged to generate earnings. ROA is displayed as a percentage and is calculated by dividing the enterprise's net income by its total asset amount. The higher the ROA, the higher the relevant organization's asset efficiency. ROA is often used to compare similar companies or to benchmark a company's current operations against its past performance. The ROA indicator also takes into account a company's debt level unlike other common metrics such as Return on Equity (ROE).