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Return on Assets & ROA Formula

The ability of a company to generate returns on its total assets

Written by

CFI Team

Published February 27, 2023

Updated July 7, 2023

ROA Formula / Return on Assets Calculation

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.

What is the ROA Formula?

The ROA formula is:

ROA = Net Income / Average Assets


ROA = Net Income / End of Period Assets


Net Income is equal to net earnings or net income in the year (annual period)

Average Assets is equal to ending assets minus beginning assets divided by 2

Image: CFI’s Financial Analysis Fundamentals Course.

Example of ROA Calculation

Let’s walk through an example, step by step, of how to calculate return on assets using the formula above.

Q: If a business posts a net income of $10 million in current operations, and owns $50 million worth of assets as per the balance sheet, what is its return on assets?

A: $10 million divided by $50 million is 0.2, therefore the business’s ROA is 20%. For every dollar of assets the company invests in, it returns 20 cents in net profit per year.

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What is the Importance of Return on Assets?

The ROA formula is an important ratio in analyzing a company’s profitability. The ratio is typically used when comparing a company’s performance between periods, or when comparing two different companies of similar size in the same industry. Note that it is very important to consider the scale of a business and the operations performed when comparing two different firms using ROA.

Typically, different industries have different ROA’s. Industries that are capital-intensive and require a high value of fixed assets for operations, will generally have a lower ROA, as their large asset base will increase the denominator of the formula. Naturally, a company with a large asset base can have a large ROA, if their income is high enough.

What is Net Income?

Net income is the net amount realized by a firm after deducting all the costs of doing business in a given period. It includes all interest paid on debt, income tax due to the government, and all operational and non-operational expenses.

Operational costs can include cost of goods sold (COGS), production overhead, administrative and marketing expenses, and amortization and depreciation of equipment and property.

Also added into net income is the additional income arising from investments or those that are not directly resulting from primary operations, such as proceeds from the sale of equipment or fixed assets. Note: non-operating items may be adjusted out of net income by a financial analyst.

Net income/loss is found at the bottom of the income statement and divided into total assets to arrive at ROA.

Video Example of Return on Assets in Financial Analysis

ROA is commonly used by analysts performing financial analysis of a company’s performance.

ROA is important because it makes companies more easily comparable. Imagine two companies… one with a net income of $50 million and assets of $500 million, the other with a net income of $10 million and assets of $15 million.

Which company would you rather own?

The first company earns a return on assets of 10% and the second one earns an ROA of 67%.

Watch more in CFI’s Financial Analysis Fundamentals Course.

Return on Assets for Companies

Below are some examples of the most common reasons companies perform an analysis of their return on assets.

1. Using ROA to determine profitability and efficiency

Return on assets indicates the amount of money earned per dollar of assets. Therefore, a higher return on assets value indicates that a business is more profitable and efficient.

2. Using ROA to compare performance between companies

It is important to note that return on assets should not be compared across industries. Companies in different industries vary significantly in their use of assets. For example, some industries may require expensive property, plant, and equipment (PP&E) to generate income as opposed to companies in other industries.

Therefore, these companies would naturally report a lower return on assets when compared to companies that do not require a lot of assets to operate. Therefore, return on assets should only be used to compare with companies within an industry. Learn more about industry analysis.

3. Using ROA to determine asset-intensive/asset-light companies

Return on assets can be used to gauge how asset-intensive a company is:

The lower the return on assets, the more asset-intensive a company is. An example of an asset-intensive company would be an airline company.

The higher the return on assets, the less asset-intensive a company is. An example of an asset-light company would be a software company.

As a general rule, a return on assets under 5% is considered an asset-intensive business while a return on assets above 20% is considered an asset-light business.

Additional Resources

Thanks for reading CFI’s guide to Return on Assets and the ROA Formula. To keep learning and become a world-class financial analyst, these additional CFI resources will be a big help:

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Calculating Investment Return In Excel

Calculating Investment Return In Excel

Investment return, or majorly called Return on Investment (in short ROI), is the basic mathematical and financial calculation we all have done in our earlier times in School. But we have not tried this on Excel. Calculating Investment Return In Excel is the way to determine how much or the percentage returns the investor will receive based on the amount being invested for the given time period. There are different ways to find the investment return or ROI depending on our input type. We will see that in below examples and descriptions below as well.

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How to Use Calculating Investment Return In Excel?

Considering the mathematical expression of calculating Return on Investment (ROI), we have different ways to find it. But the most widely used method for finding ROI is shown below. Return on Investment can be the amount gained from the market, or it can be the percentage by which we have gained the investment using the below formulas;

ROI % = (Final Invested – Investment Amount)/ Investment Amount x 100

Where, Investment Amount – As clear the amount which is an investment into scheme or business

Final Invested – Amount being raised with a certain percentage

The first formula shown is the basic formula by which we can get the amount raised after the investment and another formula will give us the Return on Investment in percentage which is more precise.

Examples Example #1 – Calculating Investment Return In Excel

In this example, we will see one of the simplest ways to calculate Return on Investment of Investment Return. For this, we have considered simple sets of columns where we will calculate the ROI for the invested amount in 2023 to the investment return in 2023, 2023, and 2023 respectively, as shown below.

Let’s consider the invested amount in the year 2023 is Rs. 10,000/- for which we got the ending value or final return as shown below in respective year columns.

To calculate the ROI or Investment return of the investment in the year 2023, we need to follow the formula which we have seen above. Here are invested amount will be Rs. 10000/- and the final amount will be Rs. 11100/-. Now let’s put these values into the formula in cell C4 as shown below.

It is better to fix the cell of the Current Value because this will be seen in all the other ROIs of 2023-2024, as shown above. Now we will press enter to exit, this will show the ROI.

As we can see, the final percentage rate of return is coming at 11% for the year 2023.

Now we will drag this formula to other side cells to calculate the ROI of 2023 and 2023. The ROI of 2023 is coming 12%, and of 2023 is coming as -11%. This means that investor is getting profit in the year 2023 and 2023 & loss in the year 2023.

Example #2 – Calculating Investment Return In Excel

In this example, we will see how to calculate ROI and Annualized return using the formula below. To calculate the annualized return, we will be using the below formula.

R= ((Invest Amount + Gain)/Invest Amount)^(365/Days)-1

We have a different set of data as shown below.

We can then calculate the days invested using the TODAY function with Investment date there in cell A2.

Now using the formula we have seen in example-1, as shown below. This would get us the %age ROI.

Calculate the Annualized Return, our final ROI for the year (considering 365 Days). Using the formula, first, add Invested amount and Gain and divide the sum with an Invested amount to calculate the whole ROI. And then, give it the power of 365 days of the year, divide it using the days invested, and subtract it by 1 to get the final value.

Pros of Calculating Investment Return In Excel

All the methods shown in the above examples are very easy to implement.

Better calculating ROI is by using the mathematical formula we have seen in the above examples and then implementing them in Excel.

Things to Remember About Calculating Investment Return In Excel

ROI and ROI Percentage are both different. ROI is the value or amount gained or lost in the time interval, and ROI Percentage shows the exact reference value by which change is observed.

Annualized Return helps us to calculate the ROI through the year or better we say at the end of the year.

Fixing the cells when moving and pasting the formula into different cells is better. It helps in keeping the right formula value in the cell.

We also have different methods in statistics that are not bound to the methods we have seen in the above examples.

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Return An Array From A Udf

This post is going to look at how to return an array from a udf. My last post looked at how to return a range from a UDF and in that, I included a small, bonus function which gave you the interior color of a cell.

I’m going to modify that function so it becomes an array function, or an array formula as they are also known. Specifically it will become a multi-cell array function as it will return multiple values into multiple cells.

What is an Array?

An array is just a list of values, e.g. 1, 2, 3, 4, 5 is an array with 5 values, or elements

That was an example of a one dimensional array. Think of one dimension representing values along a straight line, like the x-axis on a chart.

A two dimensional array holds values that can be used to represent something that requires two things to identify it, e.g. the x and y co-ordinates on a chart, the squares on a chess board, or even the cells on your worksheet (A1, etc).

Three dimensional arrays contain three lists of values used to identify something (the xyz co-ordinates) perhaps the latitude, longitude and height above sea level of a point on the Earth’s surface.

You can have more dimensions of course if you need them, but for my example we’re sticking with just one.

Returning Arrays of Different Sizes

In order to process an unknown number of values, we need to work out how many values are passed into our function and then allocate the appropriate amount of storage in an array.

Initially we allocate an unknown amount of storage space for the array named Result():

Dim Result() As Variant

Once the function is called we can work out how many cells are in the range we’re passing into the function. We can do this by using Application.Caller which gives us a Range object, as long as our function is called from a cell. This range is the range of cells passed into the function.

We can work out how many cells in the range and whether we’re passing a row or a column into the function

With Application.Caller CallerRows = .Rows.Count CallerCols = .Columns.Count End With

The number of cells in the range is CallerRows * CallerCols, so we redimension the array to hold a value for each of those cells.

'ReDimension the array to fit all the elements (cells) ReDim Result(1 To CallerRows * CallerCols)

If we pass in a range containing 6 cells, then our result will contain 6 values. Remember that this function is only dealing with one dimensional arrays, that is, values either in a row or a column.

If we pass in a range containing 10 cells, but allocate less than 10 cells for the result, we’ll get #VALUE! errors.

If we pass in 6 cells, and allocate more than 6 cells for the result, cells 7 onwards will be filled with 0.

How you choose to deal with this is up to. You can write your own error handling, or just let Excel deal with it.

Don’t Forget

This is an array formula, so when you enter it you must use CTRL+SHIFT+ENTER. That is, hold down CTRL and SHIFT, then press ENTER.

Fixed Sized Arrays

If you know the number of elements in your array will be fixed you can specify this and not worry about working it out when the function is called, For example, here’s a 10 element array:

Dim myResult(1 To 10) As Variant

But passing in a range with more or less than 10 elements could easily break your function.

Array Orientation

By default a function will return an array as a row. If you want the results to go into a column, you need to transpose the array

'Transpose the result if returning to a column GetColor = Application.Transpose(Result) Else GetColor = Result End If

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Learn The Use Cases For Return Statement

Introduction to MATLAB Return

In computer programming, a return statement is defined to be executed to return the control to the parent sub routine from the invoking subroutine. The flow of execution resumes at the point in the program code immediately after the instruction, which is called its return address, and the running scope of the code can be defined as the called subroutine. In the absence of a parent subroutine, the return statement returns the control of execution to the command prompt. In this topic, we are going to learn about Matlab return.

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The return command redirects the control to invoking script or function instead of letting MATLAB execute the rest of the consecutive commands in the called subroutine. MATLAB redirects the control nothing but to the command prompt when a script or a function contains a return, and it is not being called from any invoking program.

Use cases for a return statement

Return command is used in different conditions based on the technical requirement of the program. It can also be used for data validity checking functionality. Some of the important use cases are discussed below.

1. Bringing control to keyboard

If a program needs the user to take action on the occurrence of some specific condition, the current subroutine or function can be called directly without being triggered by any parent sub routine, and the flow of control returns to the command prompt or the keyboard when the command ‘return’ is executed.


The below code snippet defines a function findindex() where the return command is used with 2 purposes:

Performing validation checking on input data

Returning control to keyboard once the match is found


Case 1: The return statement is executed on a negative input being given

findindex(-15,[12 34 54 15 32])


Case 2: The return statement is executed on match to the input data is found

findindex(15,[12 34 54 15 32])


2. Redirecting execution flow to the parent (calling) subroutine from the called subroutine

If the program needs to reroute the flow of control to the calling subroutine or the calling function on the occurrence of some specific condition. It can be carried out when its parent subroutine triggers the current in the current subroutine or function, and the command ‘return’ is executed.


The below code snippet defines a function findindex() within another function callfunction() where the return command is used with 2 purposes:

Performing validation checking on input data of findindex() function

Returning control to callfunction() from findfunction() return command

function resultfunc = callfunction(inputval,referenceArray)result=findindex(inputval,referenceArray); if isnan(result)disp(‘Match is not found.’)    elsedisp([‘Match is found at ‘ num2str(result)])    endendfunction

callfunction(-12, [10 21 14 15 20 12 20])

Case 2: The return statement is executed on match to the input data is found

callfunction(12, [10 21 14 15 20 12 20])


3. Usage of return and continue statement in a loop

The program can have the flexibility to decide on which condition the flow of control should be rerouted to its calling sub routine or the command prompt and on which condition will force the flow to stay in the current system.


The below code snippet defines a function findindex() within another function callfunction() where the return command is used with 2 purposes:

Performing validation checking on input data of findindex() function

Returning control to callfunction() from findfunction() return command when the match is found and make the flow stay within the loop using the command ‘continue’ when the matched element is not found.



findindex(-15,[12 34 54 15 32])


Case 2: The return and continue statement execution based on finding matched or non-matched element

findindex(15,[12 34 54 15 32])


Advantages of Matlab return

Using a return statement prevents the execution of unwanted functionalities once the desired condition is satisfied. As a result, it improves code quality and optimizes the code execution. As it reduces the number of instructions to be executed, it also reduces the execution time for the program. Thus it

makes the execution faster and results in improving the performance. Use of return statement in association with ‘continues’ statement provides flexibility to the program to decide whether to reroute the flow of control or keep it running within the current scope of the code.

Additional note

While using return within conditional blocks, such as if or switch, or within loop control statements, such as, for or while, the programmer needs to be careful. In MATLAB, when the control flow reaches a return statement in a conditional block, it just exits the loop and exits the script or function in which the return command is executed. Hence directly, it returns control to the invoking subroutine or commands prompt.

In MATLAB, it is not supported to return values using the return statement. To send a return value, it is required to set the value of each ‘out’ arg. Functions may return more than one argument as return values.

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This is a guide to Matlab return. Here we discuss the Use cases for the return statement along with the examples, cases and outputs. You may also have a look at the following articles to learn more –

The Return Of Howard Zinn, And Company

The Return of Howard Zinn, and Company A packed house hears a left-wing critique of Obama

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In the video above, Howard Zinn answers a question from the audience: what would he urge Barack Obama to do? Photos below by Frank Curran

With the Tsai Performance Center filled to its 500-seat capacity, many in the audience remembered when that hall was named Hayden, the University was in turmoil, and Howard Zinn was both lightning rod and radical catalyst.

Much has changed. The Howard Zinn Lecture Series, kicking off Alumni Weekend on October 22, now celebrates Boston University’s distinguished professor emeritus of political science. As Virginia Sapiro, dean of Arts & Sciences, welcomed all and introduced three intriguing writers gathered around the man of the night, cordiality rather than conflict ruled.

“To have a kindly relationship between us and the BU administration,” said Zinn, his nod to Sapiro drawing swells of laughter, “well, we’re still trying to get used to it.”

Yet some things haven’t changed. The topic was The Promise of Change: Vision and Realty in Obama’s Presidency. And the analysis came hard from the left, with Zinn staking out the far post.

Just as intriguing were the positions of his fellow panelists, each nuanced, each approaching Obama at least a little more sympathetically. They were:

James Carroll, a National Book Award winner and Boston Globe columnist, who first met Zinn during his years as Catholic chaplain at Boston University, from 1969 to 1974, before he left the priesthood.

Ellen Goodman, a Pulitzer Prize winner, who has been writing about social change in America since 1976 and whose column appears in more than 300 newspapers.

Mary Gordon, New York’s official state author, a stuffy title for a writer whose work marries a piercing intimacy and religious and political explorations.

Zinn gingerly took up the cudgel.

“It’s a very delicate question,” he mused. “Why? Well, it’s not easy to talk about.” Everyone wants to support Obama, he continued, or at least everyone in his circle. Everyone wants to love Obama. But let’s face it: “His presidency doesn’t measure up. I have to say that. But why? How? How come?”

Militarism, he answered. Obama has kept the troops in Iraq. He’s sent more troops to Afghanistan. “He’s continued a military foreign policy.”

Not to be a know-it-all, Zinn said (“though I do know it all,” he joked), but those who expected great change from this president were fooling themselves. Look at history, he urged, invoking his mantra; Democrats are as aggressive as Republicans.

“They’re all in this for war,” he said. “That’s what we call bipartisanship.” Those surprised or disappointed are those who “exaggerated expectations, romanticized him, idealized him. Obama is a Democratic Party politician. I know that sounds demeaning. It is.”

“There’s an enormous weight left over by the Bush administration,” Zinn said. “Unfortunately, he has done nothing to begin to lift that weight.” Change can happen only by grassroots protest strong enough to move entrenched interests.

“I’ll say it: turmoil,” he concluded.

Carroll weighed in.

“President Obama’s administration began in January,” he said, then paused. “January of 1943.”

Carroll ticked off four events that year — the Allies insisting on unconditional surrender to end World War II, massive bombings of civilian sites by the American and British Air Forces, the creation of the Pentagon, and the forming of Los Alamos National Laboratory to build a nuclear weapon. Those events put in motion “a current running below the nation ever since,” he argued, and “President Obama is at the mercy of this current.”

Still, he was not as dark as Zinn. Obama’s speeches, raising expectations and changing perceptions, also count, he said. “While it totally freaks me out to disagree with Howard Zinn, I think the words matter. I think the Nobel Prize went to the right person … as an invitation to greatness.”

That said, Carroll seconded Zinn’s call for protest and pressure to change foreign policy. “Nothing happens without the grassroots,” he concluded. “That’s Howard Zinn’s point.”

Goodman said she found it “shocking, but I’m going to be the resident optimist.” The man hasn’t been president for a year, let alone a term. “We’re very impatient,” she said, and that’s not fair.

“There’s an underlying anxiety,” said Goodman. “Can you be a healer and a politician?” While she doesn’t feel hopeless about the president’s agenda, “I’m not hopeful about the rise of civility.” And so she returned to the theme of the evening, and made it personal:

“The gap between hope and reality is very much a gap inside ourselves.”

Gordon invoked Henry James: “Things are much more complicated than you ever think,” she quoted, then adding from Voltaire to build her perspective: “The best is the enemy of the good. The perfect is the enemy of the good.”

She listed what she sees as major Obama accomplishments: growing acceptance of the Muslim faith within our nation, changes in reproductive rights for women, the prospect of a much-improved health-care system. Each of these is “enormous,” she said, but even more, Obama “opens up our imagination. He reminds us that the world is a complicated place.”

And, she continued, “what will never go back is that African-American kids will look at him and say, ‘The world is different.’

“He didn’t say he was going to pull a rabbit out of a hat and there will be no more original sin,” she said. And then she closed a writer’s circle begun with Henry James: “He’s not Gabriel García Márquez. He can’t do magic realism. He has to write a realistic novel.”

After a round of questions, panelists and posse adjourned to the Castle for drinks, food, and more conversation. The ornate building was packed with people and energy and a sense of how history — including University history — is full of surprising turns.

Sidney Hurwitz, a College of Fine Arts professor emeritus of art, who taught at BU for more than 30 years, a colleague of Zinn’s and fellow activist during stormier times, summed up:

“When I see Howard up there, giving a lecture, celebrated as he deserves to be — well, I never thought I’d live to see this happen.”

The Howard Zinn Lecture Series, made possible by the gift of Alex MacDonald (CAS’72) and Maureen A. Strafford (MED’76), is an annual talk on contemporary issues from a historical point of view.

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Dij` Vu All Over Again: The Return Of Time Sharing

Women wearing capri pants and teens in bell-bottom pants were the first signs I noticed that signaled the return of the 1960s. My daughter wanting a lava lamp for her birthday was another sign. And the forthcoming Paul Simon and Bob Dylan concert tour is yet another key indicator that 1960s fashions, music, and attitudes are back in vogue. But the clearest sign that we’ve gone back to the hippie days of my youth is the resurgence of time-sharing computer systems. (see July 1999 article, “Rent an app and relax” in Datamation)

Today, it’s labeled ERP outsourcing, and the companies are called application service providers (ASPs), but the basic concept is the same as the old-fashioned time share. Instead of hiring an IT staff, buying a lot of software and hardware, and praying for a miracle, an organization buys the processing tasks it needs from a third party on a per-seat pricing basis. The outsourcer–EDS Corp., Hewlett-Packard Co., IBM, Oracle Corp. and others–sets up the application, trains your staff, runs the software on its boxes in its data center, and upgrades the software when needed.


By 2003, offering ERP services over the Web will be a $2 billion business, as more than a dozen applications service providers (ASPs) jump into the market.

Thanks to three things–the Internet, widespread interest in ERP as a solution, and vendors desperate to penetrate a suspicious middle market–the lease-rather-than-buy approach is all the rage these days. Software vendors, implementation consultants, market analysts, and publishing companies can’t pump out enough material praising the concept, and market researchers forecast ERP outsourcing revenues of $4 billion or more by tomorrow afternoon. For example, the ASP subset of ERP outsourcing–applications and transactions presented over the Internet by a third party hosting the software in one system for multiple clients–will become a $2 billion a year business by the year 2003, according to International Data Corp., of Framingham, Mass. (see chart, “ASPs on the rise”).

A short history lesson

The time-sharing approach, also known as a service bureau, grew out of two basic factors prevalent three decades ago. One, the buyers needed the technology but were afraid of the costs and complexities of “electronic data processing”–that’s what IT was called in those days. Two, the EDP sellers–IBM and the BUNCH (Burroughs, Univac, NCR, Control Data, Honeywell) couldn’t find enough customers to buy their iron, so they rented the systems by the minute or second, hence the name, “time sharing.” Here’s the Reality Check: Time sharing was all about risk avoidance, otherwise known as risk management.

By the end of the 1970s, though, the EDP risk-management equation changed. The technology had matured. More EDP priests were available to run the systems. System prices began to drop in the 1980s, due to competition, government intervention, and improved technology (there’s a reason why dumb terminals had that name). Except in a few industries or functions-the securities industry and payroll processing–time sharing became passe. CEO manhood was symbolized by having your own data center and MIS department–only wimps shared systems. Managers perceived that the risk of not owning and controlling the technology was higher than the risk of owning it.

Fast forward to 1999. Client/server ERP systems are introduced; it’s a new software technology on a new hardware base. The fledgling technology acquires a reputation as money and time sinkholes. CEOs hate spending money on any new and unproven technology–look at the success of the AS/400 to this day. Yet the appeal of an integrated suite that is Y2K compliant and is used by your customers and suppliers is strong. So the cautious CEOs listen to the pitches from EDS, Hewlett-Packard, IBM, Oracle, SAP AG, and the dozens of other companies offering to reduce the ERP risk by renting you a complete solution.

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