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        How to Analyze Earnings Reports?

        Views 5982022.10.18

        Return on assets (ROA)

        You may have seen the term "ROA" in analyst reports or financial statements many times. Do you know what it is and how the ratio can generate useful information?

        What is ROA?

        The return on assets (ROA) shows the percentage of how profitable a company's assets are in generating revenue.

        What does ROA tell you?

        Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.

        ROA is displayed as a percentage; the higher the ROA is, the better. Higher ROA indicates more asset efficiency.

        ROA for public companies can vary substantially and will be highly dependent on the industry. ROA is best used when comparing similar companies or by comparing a company to its own previous performance.

        ROA over 5% is generally considered good and over 20% excellent. However, ROA should always be compared amongst firms in the same sector.

        For example

        Pretend ABC company and XYZ company both start a clothes store. ABC company spends $40m on T-shirts, while XYZ company spends $40m on pants.

        Let's assume that those were the only assets each firm deployed. If over some given period ABC company had earned $8m and XYZ company had earned $6m, ABC would have the more efficient business.

        Limitations of return on assets

        The biggest issue with ROA is that it can't be used across industries. That's because companies in one industry, such as the technology industry, and another industry, such as oil drillers, will have different asset bases.

        How to find ROA in moomoo?


        Look at the right side of the stock page and click the tab "Analysis".
        Click on "ROA".

        Mobile App:
        At the quote page, click on the tab "Financial".
        Roll down and click on "ROA".

        Read more: What does a company's ROE tell you?
        How can a company with high earnings still be a risky investment?

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        This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Moomoo makes no representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose of the above content.

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