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Meaning & use

ROA

abbreviation·Advancedfinancebusiness

Last updated

UK/ˌɑːr.əʊˈeɪ/
US/ˌɑːr.oʊˈeɪ/

Meaning

  1. abbreviationuncountablefinancebusiness

    Return on assets: a measure of how much profit a company earns compared with the total value of what it owns.

    Grammar: Usually no article: ROA fell last year.

    Patterns

    • ROA of N percent
    • ROA for a company

    The firm's ROA rose to eight percent this year.

    Investors often compare ROA across companies in the same industry.

    A low ROA may show that assets are not being used well.

Common combinations

calculate ROA
To calculate ROA, divide net income by total assets.
high ROA
A high ROA suggests the company uses its assets efficiently.
ROA and ROE
Analysts look at ROA and ROE together.
improve ROA
Selling unused equipment can improve ROA.
ROA for the year
The bank reported an ROA of one percent for the year.

Synonyms and how they differ

return on assets
This is the full form of ROA and is better in formal writing or when the reader may not know the abbreviation.
ROI
ROI measures return on one investment, while ROA measures return across all of a company's assets.
ROE
ROE compares profit with shareholders' equity, not total assets.

Word family

asset noun
something of value that a company owns
return noun
profit earned on money invested

Commonly confused: ROA or ROI? ROA or ROE?

ROA vs ROI

ROI is return on investment and is used for a single project, not the whole balance sheet.

ROA vs ROE

ROE is return on equity and ignores borrowed money, which ROA includes.

Practice

A bank's ROA tells you how much profit it earns relative to its ____.

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