Return on Asset

Return on assets is a metric that indicates a company's profitability in relation to its total assets. ROA can be used by management, analysts, and investors to determine whether a company uses its assets efficiently to generate a profit.

Businesses are about efficiency. Comparing profits to revenue is a useful operational metric, but comparing them to the resources a company used to earn them displays the feasibility of that company's existence. Return on assets is the simplest of such corporate bang-for-the-buck measures. It tells you what earnings are generated from invested capital or assets.

ROA for public companies can vary substantially and are highly dependent on the industry in which they function so the ROA for a tech company won't necessarily correspond to that of a food and beverage company. This is why when using ROA as a comparative measure, it is best to compare it against a company's previous ROA numbers or a similar company's ROA.