The return on assets ratio measures how well a company\'s management team is doing its job. A comparison of net income and average total assets, the ROA ratio reveals how much income management has been able to squeeze from each dollar\'s worth of a company\'s assets. Investors and potential investors use this ratio to evaluate a company\'s leadership.
Many companies, particularly those involved in manufacturing and selling seasonal goods, experience wide swings in assets during the course of a year. To accommodate for these swings and produce a more accurate ratio, the total assets figure used to calculate the ROA should be an average of a firm\'s assets at the beginning and end of the statement period.