What is the ROA formula?

ROA = net income ÷ average total assets × 100%, where average total assets = (beginning + ending total assets) ÷ 2.

Above 5% is often considered good for most industries, but banks typically earn around 1% and asset-light firms much more.

Why use average assets?

Net income is earned over the whole period, so it should be compared with the assets available during that period.

How is ROA related to ROE?

ROE = ROA × equity multiplier (assets ÷ equity), so leverage makes ROE higher than ROA.

Return on Assets (ROA) Formula

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Return on Assets (ROA) Calculator

Return on assets measures how much profit a company generates from everything it owns. It divides net income by average total assets over the period. Using the average of the beginning and ending balances matches profit, which is earned over the whole year, with the assets that were in place during that year.

Formula

ROA = Net incomeAverage total assets × 100%

Where

Net income: profit after tax for the period
Average total assets: (beginning + ending total assets) ÷ 2

Calculator

Net income

Total assets, beginning of period

Total assets, end of period

Result and step-by-step solution

Return on assets

12%

Each 1.00 of assets generated 0.12 of profit.

Average total assets
700,000.00 + 800,000.002 = 750,000.00
Divide net income by it
90,000.00750,000.00 = 12%

How to use the formula

ROA reflects both profitability and efficiency: it equals net profit margin × asset turnover. A retailer with thin margins can still earn a good ROA by turning its assets over quickly, while a utility with high margins may have a low ROA because it needs enormous assets. ROA is best compared within an industry. Because it ignores how the assets are financed, it complements ROE, which leverage can inflate.

In the example, net income is 90,000 and total assets were 700,000 at the start of the year and 800,000 at the end, so average assets are 750,000 and ROA is 12%. Some analysts add back after-tax interest to net income so that ROA is not affected by the choice between debt and equity financing. For the full breakdown into margin, turnover and leverage, see the DuPont analysis.

Frequently asked questions

What is the ROA formula?: ROA = net income ÷ average total assets × 100%, where average total assets = (beginning + ending total assets) ÷ 2.
What is a good ROA?: Above 5% is often considered good for most industries, but banks typically earn around 1% and asset-light firms much more.
Why use average assets?: Net income is earned over the whole period, so it should be compared with the assets available during that period.
How is ROA related to ROE?: ROE = ROA × equity multiplier (assets ÷ equity), so leverage makes ROE higher than ROA.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.