# Return on Assets Calculator

*“What is Your ROA? An Investigation of the Many Formulas for Calculating Return on Assets“*Academy of Educational Leadership Journal (July 20, 2018)

Return on assets calculator is a tool that has been created to **help you calculate ROA** – one of the popular ratios in business.

Want to know more about it? You are at a good place! What is the return on assets and, what's more, what is a *good* return on assets? And, obviously, **how to calculate the return on assets?** These are crucial questions connected with this topic.

We hope that this short article will provide you with all the knowledge about ROA you need.

## What is return on assets?

Perhaps the first question you come across is very obvious: "what is the return on assets?"

ROA (return on assets) is a **company's net profit in relation to its assets value**. This way, we can rate the profitability of assets. This indicator informs us how profitable the company is in generating profit from its assets.

It is very important, for example, when a company wants to **take a loan**. In such a case, the bank will surely want to look into ROA data because it shows how effectively the company will spend the borrowed money.

Internally, ROA is used to evaluate whether it is necessary to change the company's strategy in the area of sales and managing assets.

## How to calculate return on assets?

As you already know that ROA is the relationship between net profit and total assets value, the derivation of the formula is very simple. You need the two variables which we have discussed above: net profit and total assets.

The next step is to **divide the first one by the second**. Once you've done this, the only thing you have to remember about it is to multiply the result by 100%, as ROA is always expressed as a percentage.

To make it all clear, here you have the exact formula used by our ROA calculator:

`ROA = (net profit / total assets) × 100%`

Now let's consider two examples with two totally different ROA ratios.

Example A:

- Net profit: $10,580; and
- Total assets: $8,800.

`ROA = (10,580 / 8,800) × 100% = 120%`

Example B:

- Net profit: $32,550; and
- Total assets: $3,100.

`ROA = (32,550 / 3,100) × 100% = 1050%`

You can also input those values in our return on assets calculator. Note that we have two absolutely different situations and you probably wonder which is better for the company. Or... maybe you have some ideas already? Go to the next section to find out whether you're right.

## What is a good return on assets?

You already know what is the return on assets and how to calculate it, so it's high time you asked: **what is a good return on assets?** Here's the answer! ROA, similarly to, for example, ROE, should be as high as possible. The rule is simple: **the higher the ROA, the better the financial condition of your company**.

It is excellent when it reaches several dozen percent, but it is very hard to get to this level and retain such a value for an extended time period. Therefore, we can talk about a good return on assets when it is about 10-15%. It is also very important to look back into the history of a company's ROA, as even a very good value does not have to mean long-term profitability for the company.

We hope that this article has helped you to find answers to your questions about ROA. If you own a business, we wish you good luck and the highest ROA ratio! :) If you are an investor, we suggest you keep reading. Make sure to check out our time value of money calculator first because cost opportunity is one of the core topics in investing.

## What are other great financial calculators?

Another two financial ratios that are excellent for analyzing returns are return on capital employed and return on invested capital (ROIC). The former compares EBIT to the capital employed, and the latter uses NOPAT.

Besides, it is key to know **how much free cash is remaining for paying** **debt's principal****, dividends, and stockholders**. You can find it out with the levered free cash flow and the unlevered free cash flow metric.