How to calculate return on assets (ROA)?
Return on total assets indicates a company’s earnings before interest and taxes (EBIT) relative to its total net assets. ROA measures the organizations overall productivity of its assets (i.e. are the assets making the company money).
If the company produces a high return on assets ratio, it will indicate that the company’s management has been making effective decisions when it comes to investing in company assets.
ROA will be calculated by dividing the company’s total net income by its average total assets.
For example, if Yeti Brewery had average assets of $100, and they generated $50 of net income, then return on assets would be 0.50 or 50%.
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