4. Return on Assets (ROA)
Measures how effectively a company uses its assets to generate profit. It’s calculated by dividing net income by total assets. A higher ROA indicates more efficient use of assets in generating earnings.
Example: A company has a net income of $50,000 and total assets of $500,000. The ROA would be ($50,000 / $500,000) × 100 = 10%.
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