Return on Assets

Return on Assets (ROA) is calculated as your net income divided either by average total assets for the appropriate accounting period. It basically shows, how good are your assets in generating profit.  

ROA is a useful metric for comparing companies in the same industry, it varies widely across different industries. ROAs gives an indication of the capital intensity of the company, which, obviously will depend on the industry; companies that require large initial investments will generally have lower return on assets.

DuPont formula breaks ROA into two components: profit margin (net income divided by assets) which is multiplied by sales divided by total assets.

Again, from financial value perspective, you are much more interested in cash ROE measured as your FCF divided by your average shareholders’ equity for the period.