A company’s return on assets (ROA) measures its net income relative to total assets. The ROA measures how well a company generates net income using its available assets. 

The formula for calculating ROA is the following:

ROA = Net Income for the Period / Average Total Assets

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2

Example ROA Calculation

Company Bravo wants to calculate its ROA for the 2023 fiscal year. The company’s relevant financial figures are as follows:

  • Net Income for 2023: $150,000.
  • Total Assets as of January 1, 2023, is $200,000
  • Total Liabilities as of January 1, 2023, is $125,000
  • Total Assets as of December 31, 2023, is $360,000
  • Total Liabilities as of December 31, 2023, is $135,000
  • Dividend Distributions during 2023: None

Average Total Assets = ($200,000 + $360,000) / 2
Average Total Assets = $280,000

ROA = $150,000 / $280,000
ROA = 0.53

Company Bravo’s ROA is 53% for the 2023 fiscal year.