Return on assets
ROA
Return on assets measures net profit against everything the company owns, regardless of whether it was funded by shareholders or lenders. It is ROE with the leverage removed.
Formula
ROA
ROA (%) = Net Profit ÷ Total Assets × 100
Benchmark: Higher is better; a wide gap between ROE and ROA means the ROE is built on debt
Reading the number
ROE divides profit by equity only. ROA divides it by all assets, which equal equity plus everything borrowed. The two ratios therefore differ by exactly the leverage: ROE equals ROA multiplied by the equity multiplier from the DuPont identity.
That makes ROA the quickest honesty check on a high ROE. If ROE is 28 percent and ROA is 7 percent, the company is running four rupees of assets for every rupee of equity, and most of the return is being manufactured by borrowing. If ROE and ROA are close, the return is genuine.
Indian example
Related ratios
Glossary terms
From the research
A Comparative Financial Analysis of Three Listed Companies
Three IT services leaders, five years of numbers: similar growth, very different margins and returns on capital, and their October 2026 valuations.
MarketsIPO Issue Price vs. Listing Price vs. Subsequent Performance
Seven of India's most talked-about IPOs since 2021, tracked from issue price to listing to October 2026. Buying on listing day lost money in six of seven.
ValuationPaytm: Valuing a Company With No Clean Comparable
Paytm is part payments processor, part device business, part loan distributor. Why no single peer fits, and how to value it in parts and in reverse.