Q18RQ.
Question
What is the calculation for ROA? Explain what ROA measures
Step-by-Step Solution
Verified Answer
Return on assets is calculated by dividing net income by average total assets. It measures the profitability of the business in using the assets.
1Step 1: Explanation on return on assets
Return on assets is the profitability ratio, which indicates the profit generated by the business in percentage form on the average total assets.
2Step 2: Calculation on return on assets
Average total assets are calculated by dividing the sum of beginning total assets and ending total assets by two. The formula for calculating return on assets is as follows:
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