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Return on Assets (ROA) – Meaning, Formula, Calculation & Interpretations [Video]

Return on Assets (ROA) – Meaning, Formula, Calculation & Interpretations

In this step-by-step tutorial, we will cover everything you need to know about Return on Assets (also known as Return on Total Assets), including its meaning to its formula, calculations, and interpretations. This tutorial also demonstrates how to calculate Return on Total Assets in Excel using the Colgate Case Study.
You can download the Colgate Return on Assets template from this link – https://www.wallstreetmojo.com/ratio-analysis-template/

What is Return on Assets?
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Return on assets (ROTA) is a profitability indicator that analyzes how well a company manages its assets to generate profits during a given period.

Formula
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Return on Assets Formula = Operating Profit (EBIT) /Average Total Assets

Uses
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– A higher return on Total Assets ratio is considered more favorable to stakeholders or investors since it shows that the company is managing its assets more effectively in order to earn or produce more profit or revenue.
– This ratio is often utilized when comparing organizations in the same industry because assets are employed differently in different industries.
For more details, you can refer to our article – https://www.wallstreetmojo.com/return-on-total-assets-formula/

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