How to calculate ROA: formulas and practical examples

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1.Pe.Return-on-assetDo you know what the ROA calculation is ? Before delving into the formula, it is important to understand what this financial ratio is. It is extremely important for both large and small companies. In this post from Moonflow, collection software , we tell you more about it.

What will you find in this text?

What is ROA?
What is ROA used for?
How is ROA calculated?
ROA Examples
1. Example of Company A: Electronics Store
2. Example of Company B: Restaurant
Can collections software help you improve ROA?
What is ROA?
ROA stands for Return On Assets . Although it is related to buy sms list accounting aspects of a company, it is important to separate it from treasury indicators since it does not focus on measuring the liquidity generated by the business.

ROA, as the name suggests, measures how profitable a company is using its assets to generate profits.

Here is an example to understand the concept of ROA:
Imagine you have an online store that sells clothing (an e-commerce site). To make it work, you invested money in things like clothing stock, a website, and software to manage orders. All of these are your assets. In addition, your e-commerce site uses financial solutions like payment gateways and financing services to streamline operations.

After a year of sales, you see how much money you made. ROA helps you understand whether your store's assets (such as inventory and technology) are being put to good use.

If you have a lot of products in stock with your online store, but you only made a little money, it means that you are not using your assets well and your ROA is low. But if you managed to make a lot of money with the same amount of products and tools, your ROA is high.