Chartered Financial Analyst (CFA) Level 1 Practice Exam 2025 - Free CFA Level 1 Practice Questions and Study Guide

Image Description

Question: 1 / 400

What does ROA stand for in financial analysis?

Return on Assets

In financial analysis, ROA stands for Return on Assets. This metric measures the efficiency of a company's use of its assets to generate earnings. It is calculated by dividing net income by total assets. A high ROA indicates that the company is effectively using its assets to produce profit, making it a valuable measure for investors and analysts to assess a firm's profitability relative to its asset base.

The focus of ROA lies in how well a company can convert its assets into net income, which provides insights into operational efficiency and management effectiveness. It is particularly useful for comparing companies within the same industry, as asset utilization can vary significantly across different sectors. Therefore, understanding ROA allows stakeholders to gauge how well a firm is leveraging its assets to drive financial performance.

Get further explanation with Examzify DeepDiveBeta

Return on Average

Revenue on Assets

Return on Allocation

Next Question

Report this question

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy