ROA (Return on Assets)

ROA (Return on Assets) measures how efficiently a company uses its assets to generate profit. It's calculated by dividing net income (what the company actually earned) by total assets (everything it owns). You'll see ROA when comparing companies in the same industry—it tells you which one squeezes more profit from the same amount of equipment, inventory, and other resources. A higher ROA is generally better. For example, if Company A earned $10 million on $100 million in assets (10% ROA) while Company B earned $5 million on the same $100 million (5% ROA), Company A is operating more efficiently. Think of it like asking: "How much bang for the buck does this business get from what it owns?"