Return on Assets (ROA) is net income divided by total assets — measuring how efficiently a company generates profit from its total resources. ROA is leverage-neutral (unlike ROE), making it a cleaner cross-company comparison metric. Average S&P 500 ROA is around 6-10%. Software and services companies achieve high ROA (low assets); banks and capital-intensive industries have low ROA (high assets). ROA is particularly important for banks and financial institutions where it's the standard profitability measure. Combine ROA and ROE to understand both operational efficiency and capital structure: high ROE with low ROA indicates aggressive leverage.
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Return on Assets
August 22, 2026 · Aditya Gupta
Accounting
Related terms
Accounts Payable
Accounts Payable (A/P) is money a company owes to suppliers for goods or services received but not yet…
Accounts Receivable
Accounts Receivable (A/R) is money owed to a company by customers for goods or services delivered on credit.…
Accrual Accounting
Accrual accounting recognizes revenues when earned (regardless of cash receipt) and expenses when incurred (regardless of cash payment)…
Accrued Expense
An accrued expense is a cost recognized in the income statement before cash is paid — recorded as…
Amortization
Amortization is the systematic allocation of intangible asset cost over its useful life — analogous to depreciation but…
Audit
An audit is an independent examination of a company's financial records, internal controls, and statements — typically conducted…
