Return on Assets (ROA)

Profit from everything it owns.

ROA measures how well a company turns its total assets, not just owners' equity, into profit. Because it uses all assets (including those funded by debt), it's a cleaner efficiency read than ROE for debt-heavy firms. ROA = Net profit ÷ Total assets × 100 Profit Rs 10 crore on assets Rs 500 crore. ROA = 2%. Compare ROE and ROA together: if ROE is high but ROA is low, the company is likely using a lot of debt. Efficiency across all assets Not flattered by leverage Good for banks (asset-heavy) 'Good' ROA varies by industry Asset values can be stale Ignores capital structure on its own

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: The Ratios.