What is my ROA?
Enter net income and the total assets at the start and end of the year. The ROA calculator divides net income by average total assets. Add net sales to split ROA into profit margin and total asset turnover.
- Return on assets (ROA)
- 15.56%
Net income of $35,000.00 on average total assets of $225,000.00 is a return on assets of 15.56%.
- Average total assets
- $225,000.00
- Profit margin
- 29.17%
- Total asset turnover
- 0.53
Return on assets (ROA): 15.56%. Net income of $35,000.00 on average total assets of $225,000.00 is a return on assets of 15.56%.
The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use
How to calculate
Computes return on assets (ROA): net income divided by average total assets, as a percent, with the profit margin and total asset turnover when net sales are given.
Example with the default inputs (Net income $35,000.00, Total assets at the start of the year $200,000.00, Total assets at the end of the year $250,000.00, Net sales $120,000.00): Net income of $35,000.00 on average total assets of $225,000.00 is a return on assets of 15.56%.
Method: Average total assets = (total assets at the start + total assets at the end) ÷ 2. ROA = net income ÷ average total assets × 100. Profit margin = net income ÷ net sales × 100; total asset turnover = net sales ÷ average total assets.
- Net income is for the same year as the two balance sheets.
- With no start-of-year total, the year-end total assets stand in for the average.
- Arithmetic is exact on the typed decimals; percents and the turnover show to 2 decimals and money to the cent, halves up.
Worked examples
Each example is checked against the calculator on every build.
- Net income $35,000.00, Total assets at the start of the year $200,000.00, Total assets at the end of the year $250,000.00, Net sales $120,000.00 gives Return on assets (ROA) 15.56%, Average total assets $225,000.00, Profit margin 29.17%, Total asset turnover 0.53.Source: OpenStax, Principles of Finance, 6.6 Profitability Ratios and the DuPont Method (return on total assets = net income ÷ average total assets; average total assets = (beginning + ending total assets) ÷ 2; Clear Lake Sporting Goods: net income $35,000, total assets $200,000 and $250,000, net sales $120,000, ROA 16%, profit margin 29%, total asset turnover 0.53). https://openstax.org/books/principles-finance/pages/6-6-profitability-ratios-and-the-dupont-method
- Net income $50,000.00, Total assets at the end of the year $400,000.00 gives Return on assets (ROA) 12.5%, Average total assets $400,000.00.Source: OpenStax, Principles of Finance, 6.6 Profitability Ratios and the DuPont Method (return on total assets = net income ÷ average total assets; average total assets = (beginning + ending total assets) ÷ 2; Clear Lake Sporting Goods: net income $35,000, total assets $200,000 and $250,000, net sales $120,000, ROA 16%, profit margin 29%, total asset turnover 0.53). https://openstax.org/books/principles-finance/pages/6-6-profitability-ratios-and-the-dupont-method
- Net income -$12,000.00, Total assets at the start of the year $150,000.00, Total assets at the end of the year $170,000.00 gives Return on assets (ROA) −7.5%, Average total assets $160,000.00.Source: OpenStax, Principles of Finance, 6.6 Profitability Ratios and the DuPont Method (return on total assets = net income ÷ average total assets; average total assets = (beginning + ending total assets) ÷ 2; Clear Lake Sporting Goods: net income $35,000, total assets $200,000 and $250,000, net sales $120,000, ROA 16%, profit margin 29%, total asset turnover 0.53). https://openstax.org/books/principles-finance/pages/6-6-profitability-ratios-and-the-dupont-method
- Net income $1,234.56, Total assets at the start of the year $10,000.10, Total assets at the end of the year $12,345.67, Net sales $5,000.25 gives Return on assets (ROA) 11.05%, Average total assets $11,172.89, Profit margin 24.69%, Total asset turnover 0.45.Source: OpenStax, Principles of Finance, 6.6 Profitability Ratios and the DuPont Method (return on total assets = net income ÷ average total assets; average total assets = (beginning + ending total assets) ÷ 2; Clear Lake Sporting Goods: net income $35,000, total assets $200,000 and $250,000, net sales $120,000, ROA 16%, profit margin 29%, total asset turnover 0.53). https://openstax.org/books/principles-finance/pages/6-6-profitability-ratios-and-the-dupont-method
How it works
- Average total assets = (total assets at the start of the year + total assets at the end) ÷ 2, or the end balance alone when the start is empty
- ROA = net income ÷ average total assets × 100
- With net sales: profit margin = net income ÷ net sales × 100 and total asset turnover = net sales ÷ average total assets, so ROA = profit margin × total asset turnover
Rules:
- Net income may be negative (a loss). Total assets are $0 or more, and the average must be more than $0; otherwise there is no answer. Net sales, when given, must be more than $0.
- Each amount is at most $1 quadrillion in size.
- A result too large to show as a number gives no answer. So does a result that is not 0 but too small to show as a number.
- The arithmetic is exact on the decimals you type. ROA, the profit margin and the turnover show to 2 decimals and money to the cent, with halves rounded up (away from 0).
Assumptions
- Net income and net sales are for the same year as the two balance sheets.
- Net income is after interest and taxes, as reported on the income statement.
Worked examples by hand
Clear Lake Sporting Goods. Average total assets = (200,000 + 250,000) ÷ 2 = $225,000. ROA = 35,000 ÷ 225,000 × 100 = 15.555…, shown as 15.56% (OpenStax rounds to 16%). Profit margin = 35,000 ÷ 120,000 = 29.17%; turnover = 120,000 ÷ 225,000 = 0.53.
Only the year-end total. ROA = 50,000 ÷ 400,000 × 100 = 12.5%.
A net loss. Average total assets = (150,000 + 170,000) ÷ 2 = $160,000. ROA = −12,000 ÷ 160,000 × 100 = −7.5%.
Cents in every amount. Average total assets = (10,000.10 + 12,345.67) ÷ 2 = $11,172.885, shown as $11,172.89. ROA = 1,234.56 ÷ 11,172.885 × 100 = 11.05%; profit margin = 1,234.56 ÷ 5,000.25 = 24.69%; turnover = 5,000.25 ÷ 11,172.885 = 0.45.
Other questions people ask
What is return on assets?
Return on assets (ROA) is net income as a percent of the assets a company uses to earn it. It shows how much profit each dollar of assets produces: an ROA of 15% means 15 cents of net income a year for every dollar of assets.
How do I calculate ROA?
Add total assets at the start and end of the year and divide by 2 for average total assets. Divide net income by that average and multiply by 100. Clear Lake Sporting Goods earned $35,000 on assets of $200,000 and $250,000: 35,000 ÷ 225,000 = 15.56%.
Why use average total assets?
Net income is earned over the whole year, while a balance sheet shows one day. Averaging the start and end balances matches the assets to the year the income was earned. If you only have the year-end figure, leave the start empty and the calculator uses the end balance.
What is a good ROA?
It depends on the industry. Businesses that need large plants or inventories, such as manufacturers and utilities, tend to have lower ROAs than service or software companies. Compare a company with its own past and with similar companies.
How is ROA different from ROE?
ROA divides net income by all assets, however they are paid for. ROE divides it by shareholders’ equity alone, so a company that borrows more has a higher ROE for the same ROA. ROE = ROA × total assets ÷ equity.
How do profit margin and asset turnover make up ROA?
ROA = profit margin × total asset turnover, the first two parts of the DuPont method. Clear Lake’s profit margin is 35,000 ÷ 120,000 = 29.17% and its asset turnover is 120,000 ÷ 225,000 = 0.5333; 29.17% × 0.5333 = 15.56%.