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What is the Return on Average Assets (ROAA) / Return on Assets (ROA) Ratio The Return on Average Assets (ROAA) is similar of the Return on Assets (ROA) but a thin difference is that current value of assets is used to evaluate the ROA, and average value of assets is used to evaluate the ROAA. … Read more
The Return on Equity (ROE) is one of the most important ratios to assess a company. It is considered as a conservative ratio to analyze a company, however, only ROE analysis is not enough; the analysis of other ratios is necessary to make an investment decision. To calculate ROE, company’s net profit is used as numerator and the total of average equity of shareholders is used as denominator.
Profitability Ratios are most important metrics used for financial analysis of a company and its business. Profitability ratios show how profitable a company and its business at different levels of profitability. Profitability ratios determine that is a company worthwhile to invest or not.
The insights of these ratios are useful when it is compared with historical trend of a company itself and its peers. In other words, these ratios for a company gives valuable insights for decision making when a company is compared with industry peers, or historical data of itself. It is better to compare for same period such as – comparison of a year’s first quarter with the first quarter of the previous year to measure quarterly change on YoY (Year-on-Year) basis. Consecutive quarters are also compared to know the change.