Return on Assets (ROA)

Learn More

Table of Contents

Get the latest e-commerce industry news, best practices, and product updates!

What Is Meant By Return on Assets (ROA)?

Return on Assets (ROA) is a measure of profitability used to evaluate the efficiency of a company’s use of its resources. In the context of logistics and e-commerce, it is used to measure the profitability of an online retail business by calculating the net income generated from its total assets. 

Significance of Return on Assets (ROA) in Logistics and E-commerce

ROA is an essential indicator of the efficiency and effectiveness of a logistics or e-commerce business. Here are the benefits of executing the return on assets.

  • ROA data gives investors an idea of how efficiently a company converts the money invested into net income. 
  • A higher ROA indicates that the company uses its resources more efficiently to generate more profit.
  • ROA can also measure the efficiency of specific operations, such as inventory management or transportation.

Prerequisites of Return on Assets (ROA) and How It Works

Return on Assets = Net Income/ Total Assets

The formula is used in the following way:

1. Calculating Net income: It is calculated after deducting COGS, general expenses, taxes and interest from the overall sales. 

2. Calculating assets: This step includes tangible assets such as buildings, equipment, vehicles, and other assets like patents and trademarks.

3. Calculating ROA: This will give you a percentage representing the return on your logistics operations.

Use Cases of Return on Assets (ROA)

Suppose a logistics company specializing in delivering goods to customers has invested AUD 2 million in assets and generated AUD 1 million in revenue during the same period. The company’s return on assets (ROA) is calculated as follows:

ROA = Net Income / Total Assets 

ROA = AUD 1 million / AUD 2 million

ROA = 0.50 

Read more

Get the latest industry news, best practices, and product updates!

Exclusive benefits to ace your e-commerce game this 2023 with Locad’s desk calendar!