Return on Assets, a profitability ratio that measures how efficiently a company uses its assets to generate profit, calculated by dividing net income by total assets. It shows how much profit each dollar of assets generates.
Acronym formed in mid-20th century financial analysis from 'return' (Middle French 'retourner'), 'on' (Old English), and 'assets' (from Old French 'assez' meaning 'enough'). The concept formalized as companies grew larger and needed standardized efficiency metrics.
ROA reveals the magic of business models - a software company might have 15%+ ROA because code doesn't require much physical assets, while a airline might struggle to reach 5% ROA despite being profitable, because planes are incredibly expensive assets!
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