The return on assets (ROA) statistic is used to determine how effectively a firm or project uses its capital assets. It’s computed as the earnings of a corporation divided by the total value of its assets.

To arrive at the final result using the given formula, simply substitute the required values and use a calculator. For example, if a company’s net income (profit) for the fiscal year is $100,000 and it generated it with assets worth $500,000, its return on assets is 1/5 or 20%. In other words, for every $5 in capital assets, it yields $1 in value. Because total assets are the sum of total liabilities and shareholder equity, which change over the year, you can instead use their arithmetic average. A high ROA indicates that the company is growing its assets, whereas a negative ROA indicates that it is losing money.