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Finance Dictionary and Glossary of Investment Terms
Return on assets (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets).
The latest 12 months'' net income divided by the total assets from the most recent quarter. (The five year data is also given.) This ratio is a measure of a firm''s effectiveness in using the assets at hand in generating earnings. Return on assets should be of special interest to investors in bank stocks. In banking, an ROA of 1 percent or better is a standard benchmark of superior performance.