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ROA = NET INCOME / AVG TOTAL ASSETS or as Sam Walton then developed and used...

ROA = NET INCOME / AVG TOTAL ASSETS
or as Sam Walton then developed and used to create one of the greatest retail giants in the world:
ROA = PROFIT MARGIN x ASSET TURNOVER
Can you now explain this, what does this mean to the founder who creates this incredible company?

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Answer #1

The first formula describe measures hoe effectively a company can earn a return on its investment in assets in other words Roa Shows how efficiently a company canconvert the money used to purchase assets into net income or profits but 2nd formula is used for avg industry calculatinon and comparision purpose. A good margin will vary considerably by industry but as a general rule of thumb 10 percentage net profit margin is avarage 20 percentage nis high and 5 percentage is low

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