Chartered Financial Analyst (CFA) Level 1 Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the CFA Level 1 Exam with comprehensive study guides. Access multiple choice questions and detailed explanations to enhance your readiness. Start your journey to become a Certified Financial Analyst today!

Start Multiple Choice Practice Test
Start Flash Cards

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What does ROA stand for in financial analysis?

  1. Return on Assets

  2. Return on Average

  3. Revenue on Assets

  4. Return on Allocation

The correct answer is: Return on Assets

In financial analysis, ROA stands for Return on Assets. This metric measures the efficiency of a company's use of its assets to generate earnings. It is calculated by dividing net income by total assets. A high ROA indicates that the company is effectively using its assets to produce profit, making it a valuable measure for investors and analysts to assess a firm's profitability relative to its asset base. The focus of ROA lies in how well a company can convert its assets into net income, which provides insights into operational efficiency and management effectiveness. It is particularly useful for comparing companies within the same industry, as asset utilization can vary significantly across different sectors. Therefore, understanding ROA allows stakeholders to gauge how well a firm is leveraging its assets to drive financial performance.

More Questions Like This