What is the formula for calculating return on assets (ROA) in Excel?

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 using Microsoft Excel to determine a company's efficiencies in generating earnings using its assets. Here we illustrate how to use Excel to make this calculation.

The Basics of Return on Assets (ROA)

Businesses (at least the ones that survive) are ultimately about efficiency: squeezing the most out of limited resources. Comparing profits to revenue is a useful operational metric, but comparing them to the resources a company used to earn them cuts to the very feasibility of that company's’ existence. Return on assets (ROA) is the simplest of such corporate bang-for-the-buck measures. Higher ROAs indicates more asset efficiency.

ROA is calculated by dividing a company’s net income by total assets:

 $Return\ on\ Assets = \frac{Net\ Income}{Total\ Assets}$Return on Assets=Total AssetsNet Income​

Example of How to Calculate the ROA Ratio in Excel

Let us take an actual historical example to illustrate how to calculate ROA using Excel: On March 31, 2015, Netflix Inc. (NFLX) 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.

Next, enter:

• "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 same quarter that ended March 31, 2015, Amazon.com reported a net loss 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.