Return on assets is a number displayed as a percentage that indicates how well your company is using its invested capital or assets to generate income. It is also commonly known as a return on investment. The higher the ROA percentage, the better. A high ROA percentage indicates a company is generating more income using less of its invested capital. The more invested capital used to generate income, the lower the ROA.
To determine your company’s ROA percentage, divide net income by total assets. For example, if your company has startup capital of $100,000 that has generated $50,000 in net income, your company has an ROA of 50%. This calculation is also frequently used to determine the amount of income an advertising or marketing campaign generates compared to the amount spent.
