What is Your ROA? An Investigation of the Many Formulas for Calculating Return on Assets

Abstract

This paper compares the eleven different versions of computing return on assets that can be found in current business textbooks. To illustrate the practical differences between the different versions, each version of ROA is calculated for eight slightly different example firms. The results are then compared and analyzed. Pros and cons are then discussed for each version of ROA. A practical ROA taxonomy is proposed to organize the several different versions and to improve comparability.

Keywords: financial ratios, financial analysis, return on assets

JEL Classification: M41, G12, G32