Glossary
Return on Assets
How much profit a company earns on its assets
Return on assets measures how much profit a company generates from all the assets it holds. Divide net profit by total assets. It shows how efficiently those assets are being used.
It differs from return on equity by including debt. ROE measures profit against shareholders' money; ROA measures it against everything the company controls, borrowed funds included.
Reading them together exposes the role of debt. A high ROE alongside a low ROA suggests returns lifted by leverage rather than by the quality of the business.
Sector differences are large. Manufacturers with factories and equipment carry heavy assets and show low ROA, while asset-light services show high figures. Compare within an industry.
A declining trend is not a good sign. Assets growing while profit does not means the money invested is failing to earn its keep.