Profitability · updated October 21, 2026

What is ROA (return on assets) and how is it calculated

ROA shows how much profit the company makes from all its assets: buildings, equipment, inventory, cash, receivables. It tells you how efficiently the company uses everything it has, whether it was paid for with equity or debt.

ROA formula

ROA=Net profit over the last 12 monthsTotal assets× 100

Net profit: What is left after all costs, interest and tax.
Total assets: Everything the company owns, from the latest balance sheet.

Worked example

A company has assets of $50 billion and a net profit of $3 billion.

$3 bnnet profit

$50 bnassets

6%ROA = 3 ÷ 50 × 100

Every $100 of assets brings in $6 of profit a year.

How to read ROA

Below 2%weak, or normal for banks

2% - 8%typical

Above 8%very efficient

Banks have an ROA of 1-1.5% because their assets (the loans) are huge. Software companies can go above 15%. Only compare within the same sector.

When ROA can fool you

Old assets: equipment that is almost fully depreciated shrinks assets on the balance sheet and inflates ROA.

Related terms

ROE ROIC Net margin

Questions about ROA

Why is ROA low for banks?

Because a bank has very large assets (the loans it gives) compared with its profit. For banks, ROE and P/B matter more.

These explanations are for information only. They are not a recommendation to buy or sell.

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