How this number is made
Return on assets is profit divided by everything the business uses, whether the money came from owners or lenders. It is harder to juice with debt than return on equity. Use average assets if the year-end figure is a spike.
- Assets are the total on the balance sheet you trust.
- Profit is the same period as those assets.
Formula
ROA = net income ÷ assets.
Worked example
With the figures already in the form, return on assets is 8.0%.
Questions
How does this differ from ROE?
ROE divides by equity only. ROA divides by equity plus what the lenders financed.
Should I add back interest?
Some people use operating profit so the lender’s cut is not held against the assets. This page uses the net income you type.