Return on Assets (ROA): Return
on Assets measures the amount of revenue generated by the company based on its
investments in Assets. It may also be defined as the rate at which the assets
of the company generate revenues for the company. This particular metric is
very much popular in analysing the capital intensity of the company. Lower the
ROA, higher the capital intensity.
Formula:
Net Income
Average Total Assets
Implication: Just
like money attracts money, the same way assets attract revenue for any
organisation and it could be in any form. Land, plant and machinery, stock,
manpower etc are some of the examples. This metric provides us information as
to requirement of assets for generation one unit of income vis a vis how
capital intensive the industry is.
I am extremely impressed along with your writing abilities, Thanks for this great share.
ReplyDeleteVery great post. I simply stumbled upon your blog and wanted to say that I have really enjoyed browsing your weblog posts. After all I’ll be subscribing on your feed and I am hoping you write again very soon!
ReplyDelete