Encyclopedia of Investment Terminology

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Return on Assets

The return on assets relates to the percentage level in which the assets a group has are making profits. It refers to the ability of a company to make money with its assets. It is calculated by adding the company’s net income and the interest expense and then subtracting the interest tax savings the business gets. This total is then divided by the average total assets of the company to get the ROA. When the ROA is larger, a lower initial investment is needed for investing in a company.

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