Return on Assets

Return on Assets (ROA) indicates the efficiency of a company's use of its assets to generate profit, i.e., how much profit is earned for every euro invested in assets. The DuPont formula is as follows:

$$ROA \mmlToken{mo}[linebreak="auto"]{=} $$ $$Profit\; Margin \times Asset\; Turnover=$$ $$\frac{Net\; Income}{Revenue} \times \frac{Revenue}{Assets}=$$ $$\frac{Net\; Income}{Assets}$$

To calculate ROA, typically, the net income from the income statement is divided by the total assets from the balance sheet. The DuPont formula allows analysis of both profitability (represented by profit margin) and asset utilization efficiency (represented by asset turnover).