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Friday, April 22, 2011

Return on Assets (ROA) Ratio

Return on Assets (ROA) ratio is used to measure the amount of profit a company made for each $1 of assets owned. It is also known as Return on Total Assets (ROTA).

Formula:
Return on Assets = Net Income / Average Total Assets
Or,
ROA = Net Profit Margin * Asset Turnover

Example 1:
AUT Ltd has $40,000 of net income after tax for the year ended 31 December 2010. During the same period its total

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