In 30 seconds
- ROA divides net income by average total assets: how much the company earns on everything it has, whether it paid for it with debt or with shareholders' money.
- JPMorgan posted a 1.35% ROA in 2025: $57,048 million of profit on $4,213,857 million of average assets.
- Under the DuPont breakdown, ROA is net margin times asset turnover: you can reach the same ROA by selling little at a high margin or a lot at a thin one.
- Kaplio treats an ROA of 1% or more as healthy for a bank; for a tech or pharma company, that level would be very poor.
- ROE is ROA multiplied by leverage: that is how a bank with a 1.35% ROA can still deliver a 16% return on equity (ROE).
Introduction
Microsoft earned $133,749 million in fiscal 2026, the year that ended June 30, 2026, on average assets of $688,690 million: an ROA of 19.4%. JPMorgan Chase, the largest bank in the United States by assets, earned $57,048 million in 2025 on average assets of $4,213,857 million: an ROA of 1.35%. So is Microsoft fourteen times the better business? No. These are two very different ways of making money, and ROA, read properly, tells you which is which.
Explanation
ROA (return on assets) divides a year's net income by everything the company carries on its balance sheet: cash, money owed by customers, inventory, factories, offices, patents and goodwill. It doesn't matter how each asset was paid for, with debt or with shareholders' money. That's why ROA measures the whole business, not just the shareholders' slice.
Think of a brother and a sister. She owns a $200,000 condo she rents out, and it leaves her $8,000 a year after expenses: a 4% ROA. He runs a $50,000 food truck, counting the trailer and the kitchen, and it leaves him $10,000: a 20% ROA. He gets far more out of every dollar invested. But she barely lifts a finger to collect the rent, while he sells hundreds of sandwiches a week on a thin margin each. ROA boils that mix of margin and volume down to a single number.
Average assets, not year-end assets
Profit is earned over the whole year, but the balance sheet is a snapshot of one day. If the company grew a lot, year-end assets overstate what it actually had working. The cleanest approach is to average total assets at the start and at the end of the fiscal year. Using year-end assets, JPMorgan's 2025 ROA would slip from 1.35% to 1.29%. Not a big gap, but always use the same method when you compare.
The DuPont breakdown
You can split ROA into two pieces: net margin (how much of each sale is left as profit) times asset turnover (how much in sales each dollar of assets generates). This is the DuPont analysis, named after the American chemical company that popularized it. Look at how differently three companies get to their ROA:
Walmart, fiscal 2026: a net margin of 3.07% times turnover of 2.61 = an ROA of 8.0%.
Microsoft, fiscal 2026: a net margin of 40.3% times turnover of 0.48 = an ROA of 19.4%.
JPMorgan, 2025: a net margin of 31.3% times turnover of 0.043 = an ROA of 1.35%.
Walmart sells a lot and earns little on each sale. Microsoft earns a lot on each sale, on an asset base heavy with data centers. JPMorgan has a high margin, but its assets are mostly loans and securities, which bring in little revenue per dollar.
Formula
ROA = Net income / Average total assets
Average total assets = (Assets at the start of the fiscal year + Assets at year-end) / 2
DuPont: ROA = Net margin × Asset turnover
Net margin = Net income / Revenue
Asset turnover = Revenue / Average total assets
ROE = ROA × (Total assets / Shareholders' equity)
Example
The table below compares the ROA of the four largest banks in the United States: JPMorgan Chase, Bank of America, Wells Fargo and Citigroup. Read it as cents of profit a year for every dollar of assets. Notice which banks clear the 1% that Kaplio considers healthy for a bank and which fall short. The table uses the trailing twelve months, so it won't necessarily match the fiscal-year calculation below to the last decimal.
Step by step: JPMorgan Chase, fiscal 2025 (Form 10-K annual report, millions of dollars)
1. Net income for 2025: 57,048.
2. Total assets: 4,002,814 at December 31, 2024, and 4,424,900 at December 31, 2025. Average: 4,213,857.
3. ROA = 57,048 / 4,213,857 = 1.35%.
4. DuPont: with net revenue of $182,447 million in 2025, net margin is 31.3% and turnover is 0.043. 31.3% × 0.043 = 1.35%.
JPMorgan brings in 4 cents of revenue a year for every dollar of assets. That's banking: it lends out its depositors' money and earns a thin spread on an enormous balance sheet.
Your turn. Citigroup earned $14,306 million in 2025. Its total assets were $2,352,945 million at the end of 2024 and $2,657,202 million at the end of 2025. Work out its ROA using average assets.
Before you look: do you think Citigroup clears the 1% bar Kaplio sets for banks? Answer: average assets of $2,505,074 million and an ROA of 0.57% in 2025. It falls short, and the case in point below shows why that matters.
Real-data example
| Company | Ticker | ROA |
|---|---|---|
| JPMorgan Chase & Co. | JPM | 1.3% |
| Bank of America Corporation | BAC | 0.9% |
| Wells Fargo & Company | WFC | 1.0% |
| Citigroup Inc. | C | 0.6% |
How to read it
How to read it
An ROA only means something within its own sector. The only threshold Kaplio's stock page applies is the one for banks: a healthy ROA starts at 1%. The other ranges in this table are rough guides:
| Sector | Weak | Normal | Good |
|---|---|---|---|
| Banks (Kaplio threshold) | below 0.8% | 0.8-1% | 1% or more |
| Regulated utilities | below 2% | 2-4% | above 4% |
| Retail and grocery | below 4% | 4-7% | above 7% |
| Industrials | below 4% | 4-8% | above 8% |
| Software and pharma | below 8% | 8-15% | above 15% |
Why is the bar so low for a bank? Because it runs on very little equity. At the end of 2025, JPMorgan had about $12 of assets for every dollar of shareholders' equity. Multiply ROA by that leverage and you get ROE: JPMorgan's 1.35% turns into a 16.1% ROE in 2025. At a tech company with hardly any debt, ROA and ROE look much more alike.
Pitfalls and limitations
1. Comparing across sectors. A 1.35% ROA is a great number for a bank and a disaster for a software company. Always compare against rivals in the same business.
2. Old assets that inflate ROA. A thirty-year-old factory is almost fully depreciated on the balance sheet. The company looks wildly profitable until it has to replace that plant at today's prices.
3. Acquisitions. Buying another company puts whatever was paid above fair value (goodwill) on the balance sheet and drags ROA down for years, even if the acquired business does fine. Check whether ROA is falling because of the business or because of a deal.
4. A one-off gain. Selling a subsidiary inflates the numerator for a year. Before you celebrate a record ROA, check where the profit came from.
Case in point: Citigroup vs. JPMorgan
The two banks run on almost the same leverage: at the end of 2025, JPMorgan had $12.2 of assets for every dollar of shareholders' equity, and Citigroup $12.5. Both bring in little revenue per dollar of assets, with turnover of 0.043 at JPMorgan and 0.034 at Citigroup. The big difference is margin: out of every dollar of net revenue, JPMorgan turned 31 cents into profit in 2025 and Citigroup 17 ($14,306 million of net income on $85,225 million of net revenue). The result: an ROA of 1.35% against 0.57%, and an ROE of 16.1% against 6.8%. With leverage almost identical, ROE adds nothing new: ROA had already told you which bank gets more out of the same kind of balance sheet. That's why it's the first quality metric Kaplio's stock page checks for a bank.
Practice on Kaplio
Frequently asked questions
What is the difference between ROA and ROE?
ROA divides net income by all of a company's assets; ROE divides it only by shareholders' equity. The gap between them is leverage: ROE = ROA × assets / equity. JPMorgan posted a 1.35% ROA and a 16.1% ROE in 2025 because it carries about $12 of assets for every dollar of equity.
How is return on assets calculated?
Divide the year's net income by average total assets, which is the average of total assets at the start and the end of the fiscal year. Both figures are in the annual report. JPMorgan earned $57,048 million in 2025 on $4,213,857 million of average assets, which works out to an ROA of 1.35%.
What is a good return on assets?
It depends on the sector. For banks, Kaplio treats an ROA of 1% or more as healthy. In retail, anything above 7% is a good rough benchmark; in software and pharma, above 15%. More than the exact number, what matters is how it compares with direct rivals and whether it holds up for several years.
Why is return on assets so low for banks?
Because a bank funds almost its entire balance sheet with deposits and debt and runs on very little equity. Its assets are loans and securities that bring in little revenue per dollar: JPMorgan took in 4 cents per dollar of assets in 2025. That's why a 1% ROA is already healthy and translates into a double-digit ROE.