Glossary

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R

Return on Assets (ROA)

Return on Assets (ROA) is a financial metric that measures how efficiently a company is using its assets to generate profit. It is calculated by dividing the company's net income by its total assets. A higher ROA indicates that a company is better at turning its assets into earnings. 📊📈

For example, let's compare three companies - one from the UK, one from the US, and one from Europe:

  1. UK: Company A has a net income of £100,000 and total assets of £500,000. Its ROA is 20% (£100,000 / £500,000).

  2. US: Company B has a net income of $80,000 and total assets of $400,000. Its ROA is 20% ($80,000 / $400,000).

  3. Europe: Company C has a net income of €120,000 and total assets of €800,000. Its ROA is 15% (€120,000 / €800,000).

Fun fact: ROA can vary significantly across industries. For instance, companies in capital-intensive industries like utilities may have lower ROAs due to their substantial investments in assets, while companies in less capital-intensive industries like software may have higher ROAs. 🏭💻