July 2019
Beginner
292 pages
6h 32m
English
Return on average assets (ROAA) compares the profit realized in the year to the average total assets during the year. It is a measure of how efficiently the company has utilized its assets to generate profit.
The ROAA is calculated as follows:

From this formula, we come to know that the EBIT is the earnings or profit before interest and tax, and the average total assets is the average of the opening and closing total assets. This is a very important ratio as it gives context to some of the profitability ratios.
Consider the following screenshot of an ROAA:
At first glance, company A appears to be the more attractive ...
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