FULL FORM OF ROA

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WHAT IS RETURN ON ASSET

      Return on asset is a type of metric that measures the profitability of a business in relation to its total asset. The ratio shows how company is performing by comparing the profit it earns to the capital it's invested in assets. The higher return of the company indicates that management of the company is efficient and it is utilizing the economic resources properly.

HOW RETURN ON ASSET IS CALCULATED 

    The ROA is calculated with the help of following formula ---

ROA =      Net Income
                 ___________
                 Average Asset

    Net income is equal to the earning or income in the year.
    Average asset is equal to ending assets minus beginning asset divided by 2.

 IMPORTANCE OF RETURN ON ASSET

    Return on asset formula is an important ratio in assessing the company's profitability. The ratio is used when comparing a company's performance between quarters or when comparing two different companies of similar size in the same industry. It is very important to consider the scale of business and the operations performed when comparing two different firms using ROA. 
                   
                 



    

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