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ROA
(Return on Assets)
ROA (Return on Assets) shows how efficiently a company generates profit from its assets: Net Income / Total Assets. A 10% ROA means $0.10 profit per $1 of assets.
Capital-light firms (software) often have higher ROA than heavy-asset ones (manufacturing). For example, Google's 15% ROA (2023) outperforms Boeing's 2%. Investors compare ROA to WACC—if ROA < WACC, the firm destroys value. Banks use ROA with ROE (leveraged returns) to assess risk. The FDIC reports average U.S. bank ROA of 1.2%. Unlike EBITDA, ROA includes taxes and interest, reflecting true asset productivity.
Capital-light firms (software) often have higher ROA than heavy-asset ones (manufacturing). For example, Google's 15% ROA (2023) outperforms Boeing's 2%. Investors compare ROA to WACC—if ROA < WACC, the firm destroys value. Banks use ROA with ROE (leveraged returns) to assess risk. The FDIC reports average U.S. bank ROA of 1.2%. Unlike EBITDA, ROA includes taxes and interest, reflecting true asset productivity.