ROA — Return on Assets — is translat as return on assets. This is a significant economic indicator for any enterprise, which helps to understand how effectively the business uses the resources under its control to generate net profit. In other words, the value of the coefficient demonstrates what part of the profit the business receives from each ruble invest in assets.
Before determining the ROA formula, you ne to country email list get acquaint with the indicators that determine this coefficient. ROA consists of two elements: net profit, average asset size.
1) Assets. These are the resources that the enterprise has. They are us to run the business, help generate income or ruce expenses. In this case, useful assets are divid into:
Calculation example
Let’s look at the method of calculating the return on assets using an example. Let’s assume that after calculating revenue and income, it turn out that the pottery workshop’s net profit for the year was 450,000 rubles.
All initial data for calculating the return on assets localize tourism marketing campaigns ratio is usually taken from the accounting statements of the business after the balance sheet has been assess. However, the financial documents of large public companies are often publicly available.
Therefore, you can study the reports of any company and calculate the profitability of all assets. For example, this is what part of the financial report of PJSC Lukoil looks like: the first image shows the consolidat report, and the second one shows the profit and loss report.
What is ROA for and how to analyze it
This ratio is useful both for internal users – managers, analysts, financiers, and for external users – investors, banks, and so on.
The company’s return on assets should be analyz zn business directory dynamically and monitor to ensure that this financial indicator is gradually increasing. This will indicate that the business is effectively using its own assets, invest capital and borrow funds to generate gross profit.
External users, on the other hand, typically compare the ROA of several different companies within the same industry. This helps them choose which company is easier to invest in to get the most benefit.
