Return on assets (ROA) is used in fundamental analysis to determine the profitability of a company in relation to its total assets. To calculate a company's ROA, divide its net income by its total assets. The ROA formula can also be calculated in Microsoft Excel to determine a company's efficiencies in generating earnings using its assets.
Example of How to Calculate the ROA Ratio in Excel
As of March 31, 2015, Netflix Inc. reported $23.696 million in net income and total assets of $9,240,626,000 for that quarter.
Assume you want to calculate the return on assets ratio of Netflix. First, right-click on columns A and B, and left-click on "Column Width" to change the value to 28 for each of the columns. Then, click OK. Enter "Netflix Incorporated" in cell B1.
- "March 31, 2015," into cell B2
- "Net Income" into cell A3
- "Total Assets" into cell A4
- "Return on Assets" into cell A5
- "=23696000" into cell B3
- "=9240626000" into cell B4.
To calculate the ROA, enter the formula "=B3/B4 "into cell B5. The resulting return on assets of Netflix, which appears in cell B5 is 0.0026 or 0.26%.
Comparing Return on Assets of Different Companies
This figure can be compared to a competitor of Netflix, such as Amazon.com. For the quarter ending March 31, 2015, Amazon.com had a net income of -$57 million and total assets of $50.075 billion.
Right click on column C and left click on Column Width and change the value to 28. Click "OK" and enter:
- "Amazon.com Incorporated" into cell C1
- "March, 31, 2015" into cell C2
- "=-57000000" into cell C3
- "=50075000000" into cell C4
- "= C3/C4" into cell C5
Amazon.com Incorporated has a return on assets of -0.0011 or -0.11%, which appears in cell C5. In this example, based on the ROA for the quarter ending on March 31, 2015, Netflix Incorporated is better at converting its assets into profit.
(For related reading, see "Use ROA to Gauge a Company's Profits.")