How to Locate Where ROA is Coming From in an Industry?

To locate where return on assets (ROA) is coming from in an industry, you can perform an analysis of the financial statements and ratios of companies in the industry. Here are some steps you can follow:

1. Collect financial statements for a sample of companies in the industry. You can typically find these on a company's investor relations website or through a financial database such as Bloomberg or Capital IQ.

2. Calculate ROA for each company using the following formula: ROA = Net income / Average total assets. Net income can be found on the income statement, and average total assets can be calculated by adding the total assets at the beginning and end of the period and dividing by 2.

3. Compare the ROA of each company to the industry average. This will give you an idea of which companies are outperforming their peers in terms of generating profits from their assets.

4. Analyze the financial ratios of the companies with higher ROA to understand what is driving their strong performance. Some ratios that may be relevant to consider include the profit margin, asset turnover, and financial leverage ratios.

5. Consider other factors that may be impacting ROA, such as the industry's competitive dynamics, regulatory environment, and economic conditions.

By performing this analysis, you should be able to get a sense of where ROA is coming from in the industry and identify the factors that are driving strong performance.