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 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 its resources. A higher ROA generally means better management and operational efficiency. For example, if Company A has an ROA of 8% while Company B has 4%, Company A is earning twice as much profit from each dollar of assets. It's a useful reality check: a company might look profitable on paper, but ROA reveals whether it's actually putting its resources to work effectively.