Return on Assets (ROA)

Return on assets measures the net profits generated by a company’s assets. Like return on capital, return on asset measures how efficiently a company is usingits assets to generate a profit. ROA is measured by dividing a chosen measure of a company’s net earnings (some analysts exclude interest expense, for example, to get a cleaner view of underlying profits) by total assets. Average assets are used to smooth asset fluctuations over a given period.