Return on Assets is often ignored ratio in the stock analysis and we tend to focus too much on Return on Equity directly. But its important to analyze both Return on Assets and Return on Equity over the historical time frame to arrive at decisions. Its helpful to even determine how capital intensive businesses are and what kind of returns do these businesses generates over their assets.

Return on Assets can be further broken down into Return on Operating and Non-Operating Assets. This will help us to analyze business performance based on the underlying operating assets which is crucial. This will also help entrepreneurs understand how to allocate capital based on the returns of their operating assets.

Here is a video where am introducing the concept of ROA or return on Assets.