Return on Assets (ROA)

Return on Assets (ROA) is a profitability ratio that measures how efficiently a company uses its total assets to generate net profit. It is calculated as: ROA = Net Profit ÷ Total Assets × 100. A higher ROA indicates that management is deploying its asset base effectively to create earnings. ROA is particularly useful when comparing companies within the same industry, as asset intensity varies significantly across sectors. Capital-light businesses like technology and FMCG companies tend to have higher ROA than asset-heavy industries.