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Return on Assets (ROA)
Return on Assets (ROA) is a very useful number for comparing companies in the same industry.
It tells us how many dollars can company generate with each dollar of assets.
ROA is expressed as percentage and is computed as:
ROA= Net Income\Total Assets
The higher the ROA is, the better, because the company is generating more money with the given assets, or is generating the same amount of money on less investments.
It is important to remember that both debt and equity are included in company’s total assets.
| Related Terms: Real Estate Operating Company - REOC |