Return on Assets

Earnings divided by total assets.

This number tells you "what the company can do with what it's got", ie how many dollars of profits they can achieve for each dollar of assets they control. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. Capital-intensive industries (like railroads and nuclear power plants) will yield a low return on assets, since they have to own such expensive assets to do business. (And if they have to pay a lot to maintain these assets, that will cut into the ROA even more, since the maintenance costs will decrease their earnings). Shoestring operations (software companies, job placement firms) will have a high ROA: their required assets are minimal.

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