2016-12-02 00:00:00 Finance and Accounting English Learn the definition of return on assets, and why your company's ROA percentage is important to you and your investors. https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2017/10/08213833/Woman-in-accounting-office-explains-small-business-terms-near-briefcase.jpg Small Business Terms: Return on Assets

Small Business Terms: Return on Assets

0 min read

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.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

File Your Nonprofit Organization Information Return

Nonprofit organizations don’t turn a profit by definition, and by extension, they…

Read more

Dealing With Capital Gains Tax When Selling Your Business

If you sell your business, you may have capital gains, and by…

Read more

Filing Taxes for Nonprofit Clients

Although nonprofit organizations and charities aren’t run for personal profit, they still…

Read more