ROA: drag net income
Drag the bar to set net income. Total assets are held still, so the headline ROA moves only because profit after interest does. Raise the profit and the rate rises. Cut the assets instead, on a different page, and the same profit prints a higher ROA with no change in the year.
ROA
5.63%
Net income
$45,000
Assets stay at $800,000. A thinner asset base would raise the same profit's ROA without the year having earned more. Illustrative arithmetic, not a rating or advice.
Total assets
$800,000, held still so only the profit moves the rate.
In short
- Drag the bar up for more net income and a higher ROA.
- Read the rate as percentage points: 5.625, not 0.05625.
- Watch the asset line stay put. Only the numerator is moving.
- Focus the handle and use the arrow keys to step profit.
A return on the whole sheet
Net income is what is left after interest. Total assets are the whole balance sheet. Divide one by the other. How return on assets works is that division, with the ROA calculator under the answer.
ROE is the same profit over equity only. The equity multiplier is the conversion. ROA against ROE is the pair.
DuPont is the next split
ROA is net margin times asset turnover. DuPont analysis then multiplies by the equity multiplier to reach ROE. This picture holds assets still so only the profit moves the first rate.
After-interest is not operating
A heavier coupon lowers net income and lowers ROA even if EBIT did not move. ROIC is the ratio that tries to take the financing out. This picture will not. It is educational material, not financial advice.
Common questions
Is a higher ROA a better firm?
Not by itself. The same profit on a thinner asset base prints a higher rate. Check turnover and margin before treating the rise as an operating improvement.
Why is this not ROE?
Because the denominator is total assets, not equity. ROE applies the equity multiplier on top.
Is 5.625 percent a target?
No. It is net income over assets on the teaching sheet. It is educational material, not advice.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.