ROA
Business & Finance abbreviation · Finance
| Stands for | Return on assets |
|---|---|
| Categories | Business & Finance |
ROA stands for Return on assets, a finance abbreviation.
Ratio of net income to average total assets, measuring how efficiently a company turns everything it owns into profit regardless of how those assets are financed. It matters most for banks, where an ROA of around 1 percent is traditionally viewed as healthy.
Example: Asset-light software firms often post an ROA above 10 percent, while large banks rarely exceed 1.5 percent.
Usage notes
Because ROA uses total assets, it is lower than ROE for any company that uses debt, and the ratio between the two reflects leverage. Some analysts add after-tax interest expense back to net income so that financing choices do not distort the comparison. Comparisons are meaningful only within an industry, since capital intensity varies enormously.
Related abbreviations
More finance abbreviations
- PIK – Payment in kind
- PIPE – Private investment in public equity
- PV – Present value
- QoE – Quality of earnings
- RAROC – Risk-adjusted return on capital
- RCF – Revolving credit facility
- ROCE – Return on capital employed
- ROE – Return on equity
- ROI – Return on investment
- ROIC – Return on invested capital
- ROS – Return on sales
- RRR – Required rate of return