How to Calculate Return on Assets (ROA)

By Keith Speights – Updated Oct 17, 2025 at 2:49 AM

Key Points

ROA measures profit relative to a company's total assets; higher ROA indicates better financial efficiency.
ROA is calculated with either net income and total assets or with net profit margin and asset turnover.
J&J's 2020 ROA calculated using both methodologies ranged between 8.4% to 8.9%.

Return on assets (ROA) is an important valuation and growth metric for companies. If you want to understand a company's business, then determining the company's ROA is useful. Here, we cover the following topics to inform you about ROA and help you calculate it for any business:

What is return on assets?
Return on assets formula.
Example of how to calculate return on assets.
Frequently asked questions about return on assets.
The significance of return on assets.

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An infographic showing how to calculate ROA: Return on assets equals net income divided by total assets. — Image source: The Motley Fool

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How to Calculate Total Monthly Net Income as a Percentage of Revenue

Net income as a percentage of revenue is known as the net profit margin, and it can be useful for businesses to know.

The significance of return on assets

Return on assets is a useful metric because it provides insight on how effectively a company generates profits from its assets. Companies with high ROAs derive more profits from the same amount of assets than companies with low ROAs. The stocks of companies with high ROAs are more likely to perform well over the long term.

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About the Author

Keith Speights is a contributing Motley Fool healthcare analyst covering publicly traded companies across pharmaceuticals, biotechnology, medical devices, technology, and marijuana. Prior to The Motley Fool, Keith was CEO of Constant Care Technology, a healthcare technology company; vice president of American HealthTech, a healthcare software company; and a director of operations for Blue Cross Blue Shield of Mississippi, a health insurer. He holds a B.S. in Industrial Engineering from Mississippi State University.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

Example of how to calculate return on assets

There are two ways to calculate return on assets -- by using net income and total assets and by using net profit margin and asset turnover. All the numbers needed in these calculations can be obtained from a company's financial statements. We'll use 2020 results from healthcare giant Johnson & Johnson (JNJ +0.46%) as an example to illustrate both methods.

Calculating ROA using net income and total assets

Find Johnson & Johnson's 2020 net income on its income statement. The income statement for 2020 is found in the company's latest 10-K (annual) report with the U.S. Securities and Exchange Commission (SEC). The Johnson & Johnson 10-K report for 2020 indicates that the company generated net income of $14.7 billion.

Find the company's total assets on its balance sheet, which is also contained in the 10-K filing. J&J's total assets at the end of 2020 were valued at $174.9 billion.

Divide Johnson & Johnson's net income by its total assets and then multiply that amount by 100. Net income of $14.7 billion divided by total assets of $174.9 billion gives a result of 0.084, which is multiplied by 100 to produce an ROA of 8.4% for the company in 2020.

Calculating ROA using net profit margin and asset turnover

Find Johnson & Johnson's net income on its income statement. As noted in the example above, the company's net income in 2020 was $14.7 billion.

Find the company's total revenue on its income statement. J&J's total revenue in 2020 was $82.6 billion.

Calculate Johnson & Johnson's net profit margin by dividing its net income into its total revenue and multiplying that amount by 100. Divide the company's net income of $14.7 billion by its total revenue of $82.6 billion. Multiplying that amount by 100 yields a net profit margin for the company of 17.8%.

Calculate the average value of the company's assets during the year. The 10-K report indicates that J&J's total assets were valued at $157.7 billion at the end of 2019. At the end of 2020, the company's total assets were worth $174.9 billion. The average of those two numbers -- $166.3 billion -- equals the company's average asset value during the period.

Calculate asset turnover rate by dividing the company's total revenue into the average asset value and multiplying that amount by 100. Dividing the total revenue of $82.6 billion by the average asset value of $166.3 billion and converting that value into a percentage yields an asset turnover rate of 50%.

Multiply Johnson & Johnson's net profit margin by its asset turnover rate to calculate its 2020 return on assets. The company's net profit margin of 17.8% times its asset turnover rate of 50% yields an ROA of 8.9%.

How to Calculate Return on Assets (ROA)

Key Points

How to Invest in Stocks: 5 Steps to Get Started

How to Invest in Mutual Funds

Investment Guide for Teens & Parents with Teens

How to Calculate Total Monthly Net Income as a Percentage of Revenue

The significance of return on assets

About the Author

Our Guides

Premium Investing Services

What is return on assets (ROA)?

Return on assets formula

Return on assets vs. return on equity (ROE)

FAQs

Which ROA calculation method is better?

What is considered a good ROA?

Related investing topics

The significance of return on assets

Example of how to calculate return on assets

Calculating ROA using net income and total assets

Calculating ROA using net profit margin and asset turnover