Return on average assets (ROAA)

Return on average assets (ROAA) is a measure of profits relative to size that is most commonly used in analysing banks and finance companies.

It is fairly straightforward:

ROAA = net profit ÷ average assets

As numbers for assets are usually only available for the ends of reporting periods (years, half years or quarters), the average is an approximation that may not reflect highs or lows between the ends of reporting periods: it implicitly assumes that changes are fairly smooth.

Nonetheless, it is a reasonably useful efficiency measure for banks that is not dissimilar to margin numbers for non-finance businesses.

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