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ROA (Return Of Asset) formula

Navigasi - The ROA formula is usually sought after by Accounting students, some are just looking for it just to know, some are looking for it for their thesis research material. Therefore, in this article, we will discuss the ROA formula, but before that the author tries to explain in depth about ROA.

ROA (Return Of Asset) formula
ROA (Return Of Asset) formula

Judging from the understanding of Return on Assets (ROA) is the ratio between Net Income After Tax on assets as a whole shows a measure of asset productivity in providing returns on investment (Sawir. 2012: 322).

Meanwhile, according to Ghozali and Irwansyah (2002) in Arista (2012) "Return on Assets measures the effectiveness of the company in utilizing all sources of funds which is often also called return on investment".

Meanwhile, according to Ang (1997) in Arista (2012) said that: "Return on Assets is one of the profitability ratios used to measure the company's ability to generate profits by utilizing its assets".

From these definitions, it can be concluded that Return on Assets is the ratio of return on assets used to evaluate whether management has received adequate returns (Reasonable Return) from the assets under its control. In calculating this ratio, the result is usually defined as net income (Operating Income).

This ratio is a useful measure if one wants to evaluate how well the company has used its funds, regardless of the relative size of the source of these funds. Return on Assets is often used by top management to evaluate business units in a multidivisional company. The ROA formula as the core of the discussion in this article is as follows:

Formula of Return On Assets (ROA)
ROA = Net Profit : Total Assets

The formula above is certainly very simple and easy to apply, for example. If a company has a total net income of $10,000, while the company's total assets are $5,000,000, then if we want to find ROA, only net profit is divided by (/) total assets. The result is 0.002. This means the ROA of the company is 0.002.