By VestAI Research | Last updated: March 2026
Return on Assets: Meaning, Definition & Indian Stock Market Examples
Net profit divided by total assets — measures how efficiently assets generate profit.
What is Return on Assets?
Return on Assets (ROA) = Net Profit ÷ Total Assets × 100. It shows how efficiently management uses the company's total asset base to generate profit. Higher ROA indicates more efficient asset utilisation. It complements ROE by removing the effect of financial leverage.
Return on Assets — Indian Stock Market Example
IT companies like TCS have ROA above 20–25% due to asset-light models. Banks' ROA is typically 1–2% (assets include massive loan books). Manufacturing companies commonly show ROA of 8–15%. NTPC (power company) has lower ROA due to large fixed assets.
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Why is ROA lower for banks than other companies?
Banks hold enormous assets (deposits lent out as loans), so the denominator is very large even if profits are healthy. For banks, ROA of 1–2% is actually excellent. That is why banks are better evaluated using NIM (Net Interest Margin) and ROE rather than ROA.
What is a good ROA for Indian companies?
For non-financial companies, ROA above 10% is healthy; above 20% is excellent. Asset-light businesses (IT, FMCG, pharma) naturally show higher ROA than capital-intensive ones. Compare within industry for meaningful benchmarking.
Related Terms
Return on Equity
Net profit as a percentage of shareholder equity — measures capital efficiency.
Return on Capital Employed
EBIT as a percentage of capital employed — measures total capital efficiency including debt.
Asset Turnover Ratio
Revenue divided by total assets — measures how efficiently assets generate sales.
Debt-to-Equity Ratio
Total debt divided by shareholder equity — measures financial leverage.
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