Return on Assets (ROA) Ratio
A Return on Assets (ROA) Ratio is a ratio for how profitable a company's assets are in generating company revenue.
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- Counter-Example(s):
- See: Capital Intensity, Profit (Accounting), Asset, Earnings per Share.
References
2015a
- (Wikipedia, 2015) ⇒ http://en.wikipedia.org/wiki/Return_on_assets Retrieved:2015-3-16.
- The return on assets (ROA) shows the percentage of how profitable a company's assets are in generating revenue.
ROA can be computed as: : [math]\displaystyle{ \mathrm{ROA} = \frac{\mbox{Net Income}}{\mbox{Average Total Assets}} }[/math]
This number tells you what the company can do with what it has, i.e. how many dollars of earnings they derive from each dollar of assets they control. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. Return on assets gives an indication of the capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets. ROAs over 5% are generally considered good.
- The return on assets (ROA) shows the percentage of how profitable a company's assets are in generating revenue.
2015b
- http://fortune.com/2015/05/04/by-the-numbers-apple-google-facebook-amazon/
- QUOTE: When compared with the other three horsemen of tech by such measures as cash flow, return on assets, brand value, earnings growth, dividends and cash holdings, Apple seems grossly undervalued. The contrast with Amazon is particularly striking. In fact, if you do the math -- multiplying Amazon's earnings per share by its price to earnings to get the price per share -- the math blows up. “Lacking any trailing earnings, Amazon has no P/E ratio," says Merckel. “The denominator is zero. Amazon's stock price is 100% based on the future hope that it will generate earnings to justify its current valuation." ...
- QUOTE: When compared with the other three horsemen of tech by such measures as cash flow, return on assets, brand value, earnings growth, dividends and cash holdings, Apple seems grossly undervalued. The contrast with Amazon is particularly striking. In fact, if you do the math -- multiplying Amazon's earnings per share by its price to earnings to get the price per share -- the math blows up. “Lacking any trailing earnings, Amazon has no P/E ratio," says Merckel. “The denominator is zero. Amazon's stock price is 100% based on the future hope that it will generate earnings to justify its current valuation." ...