By using the following information, calculate return on assets (ROA).
Return on equity -- 6.5 percent; Sales -- $1,625,000; Total debt ratio -- 0.30; Total debt -- $648,000
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Return on Assets (ROA) is a type of return on investment (ROI) metric that measures the profitability of a business in relation to its total assets. This ratio indicates how well a company is performing by comparing the profit (net income) it’s generating to the capital it’s invested in assets. The higher the return, the more productive and efficient management is in utilizing economic resources. Below you will find a breakdown of the ROA formula and calculation.
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