Financial Statement Analysis
 Ratio Analysis of Financial Statements (Formula, Types, Excel)
 Ratio Analysis Advantages
 Ratio Analysis
 Liquidity Ratios
 Cash Ratio
 Cash Ratio Formula
 Quick Ratio
 Quick Ratio Formula
 Current Ratio
 Current Ratio Formula
 Acid Test Ratio Formula
 Defensive Interval Ratio
 Working Capital Ratio
 Working Capital Formula
 Net Working Capital Formula
 Changes in Net Working Capital
 Cash Flow from Operations Ratio
 Cash Reserve Ratio
 Operating Cycle Formula
 Current Ratio vs Quick Ratio
 Bid Ask Spread
 Liquidity vs Solvency
 Liquidity
 Solvency
 Solvency Ratios
 Equity Ratio
 Capital Adequacy Ratio
 Liquidity Risk
 Altman Z Score
 Turnover Ratios
 Inventory Turnover Ratio
 Accounts Receivable Turnover
 Accounts Receivables Turnover Ratio
 Accounts Payable Turnover Ratio
 Days Inventory Outstanding
 Days in Inventory
 Days Sales Outstanding
 Average Collection Period
 Days Payable Outstanding
 Cash Conversion Cycle
 Cash Conversion Cycle (CCC) Formula
 Fixed Asset Turnover Ratio Formula
 Debtor Days Formula
 Working Capital Turnover Ratio
 Profitability Ratios
 Profitability Ratios Formula
 Common Size Income Statement
 Vertical Analysis of Income Statement
 Profit Margin
 Gross Profit Margin Formula
 Gross Profit Percentage
 Operating Profit Margin Formula
 EBIT Margin Formula
 Operating Income Formula
 Net Profit Margin Formula
 EBIDTA Margin
 Degree of Operating Leverage Formula (DOL)
 NOPAT Formula
 OIBDA
 Earnings Per Share
 Basic EPS
 Diluted EPS
 Basic EPS vs Diluted EPS
 Return on Equity (ROE)
 Return on Capital Employed (ROCE)
 Return on Invested Capital (ROIC)
 Return on Sales
 ROIC Formula (Return on Invested Capital)
 Return on Investment Formula (ROI)
 ROIC vs ROCE
 ROE vs ROA
 CFROI
 Cash on Cash Return
 Return on Total Assets (ROA)
 Return on Average Capital Employed
 Capital employed Employed
 Return on Average Assets (ROAA)
 Return on Average Equity (ROAE)
 Return on Assets Formula
 Return on Equity Formula
 DuPont Formula
 Net Interest Margin Formula
 Earnings Per Share Formula
 Diluted EPS Formula
 Contribution Margin Formula
 Unit Contribution Margin
 Revenue Per Employee Ratio
 Operating Leverage
 EBIT vs EBITDA
 EBITDAR
 Capital Gains Yield
 Tax Equivalent Yield
 LTM Revenue
 Operating Expense Ratio Formula
 Overhead Ratio Formula
 Variable Costing Formula
 Capitalization Rate
 Cap Rate Formula
 Comparative Income Statement
 Capacity Utilization Rate Formula
 Total Expense Ratio Formula
 Efficiency Ratios
 Dividend Ratios
 Debt Ratios
 Debt to Equity Ratio
 Debt Coverage Ratio
 Debt Ratio
 Debt to Asset Ratio Formula
 Coverage Ratio
 Coverage Ratio Formula
 Debt to Income Ratio Formula (DTI)
 Capital Gearing Ratio
 Capitalization Ratio
 Interest Coverage Ratio
 Times Interest Earned Ratio
 Debt Service Coverage Ratio (DSCR)
 DSCR Formula (Debt service coverage ratio)
 Financial Leverage Ratio
 Financial Leverage Formula
 Degree of Financial Leverage Formula
 Net Debt Formula
 Leverage Ratios
 Leverage Ratios Formula
 Operating Leverage vs Financial Leverage
 Current Yield
 Debt Yield Ratio
 Solvency Ratio Formula
Return on Average Assets Formula
Return on average assets formula helps to find out how a company is utilizing its assets. For an investor, every profitability ratio is important. Only net profit margin and gross profit margin won’t help; the investor also needs to know how well the assets are being utilized to generate profits.
ROAA formula finds out just that – a profitability ratio that tells us how well a company uses its assets to fuel its profits.
Here’s the return on average assets formula –
Example of ROAA Formula
Let’s take a simple example to calculate ROAA formula.
Eye Lash Co. has the following information –
 Net Income – $150,000
 The beginning total assets – $500,000
 The ending total assets – $400,000
Find out the ROAA.
First, we will add up the beginning and the ending total assets. And then take a simple average.
4.8 (388 ratings)
 The average total assets = ($500,000 + $400,000) / 2 = $450,000.
Using the return on average assets formula, we get –
 ROAA = Net Income / Average Total Assets
 Or, = $150,000 / $450,000 = 1/3 = 33.33%.
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Explanation of Return on Average Assets Formula
In the above ratio, there are two components.
 The first component is the net income. If we can look into the income statement of the company, we would be able to find the net income. Net income is the last item in the income statement. When we deduct the taxes from PBT (profit before taxes), we get the Profit after Tax (PAT) or net income.
 The second component in the ratio is average total assets. To find out assets, we need to look into another financial statement of the company, i.e. balance sheet. In the balance sheet, we will find both the current assets and noncurrent assets. To find out the average total assets, we need to consider total assets both at the beginning and at the end. And then we need to add the beginning total assets and the ending total assets and then divide the sum by two to get a simple average.
Use of ROAA Formula
Let’s understand the application of ROAA formula from two points of views.
 For the investors, it is important to know whether the company is financially strong or not. To know that, they use ROAA formula to see how well the company is utilizing its assets.
 If the ROAA is lower, it is easily understood that the company is the higher assetintensive company. On the other hand, if the ROAA is higher, the company is lower asset intensive.
 The investors need to look at the industry first before interpreting the ratio; because a higher assetintensive industry will always result in lower ROAA for the company and vice versa.
 For the management, this ratio is also important because the ratio can talk a lot about the performance of the company; and by comparing the ratio with the similar companies under the same industry, management would be able to understand how well the company is doing.
Return on Average Assets Calculator
You can use the following Return on Average Assets Formula Calculator.
Net Income  
Average Total Assets  
Return on Average Assets Formula =  
Return on Average Assets Formula = 


Return on Average Assets in Excel (with excel template)
Let us now do the same example above in Excel. This is very simple. You need to provide the two inputs of Net Income and Average Total Assets.
You can easily calculate the ratio in the template provided.
You can download this return on average assets template here – Return on Average Assets Excel Template
Return on Average Assets ROAA Formula Video
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This has been a guide to Return on Average Assets formula, its uses along with practical examples. Here we also provide you with ROAA Calculator with downloadable excel template. You may also have a look at these articles below to enhance your financial analysis learnings
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