Financial Terms Glossary

Return On Assets (ROA)

Formal

A simple percentage comparison between the profits generated by a business and the assets used or utilised to generate that profit. Eg I have £1 Million assets in a business and make £100,000 profits per annum = 10% Return On Assets

Informal

I make a £1 Million profit every year. This sounds good, but if I have used £100 Million of cash and business assets to generate this amount then this return is not so good after all. This is because I have only returned 1% on the assets used in the business to realise this profit.

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