What is Adjusted Return on Assets?
Adjusted return on assets (Adjusted ROA) is the return-on-assets ratio recalculated after stripping out one-off items, non-operating income, and items that distort the operating performance. It gives a cleaner picture of how well a business uses its assets in normal trading.
How It Works
- Standard ROA = Net income / Total assets
- Adjusted ROA adds back unusual gains and losses, restructuring charges, and impairments
- May also remove non-operating assets from the denominator (e.g., excess cash, idle land)
- Useful for cross-period and cross-company comparisons
- Always disclose the adjustments — undisclosed adjustments destroy credibility
Saudi Context
Tadawul-listed Saudi companies often report adjusted profit figures alongside IFRS results, especially in industries with frequent impairments (real estate, petrochemicals). The CMA disclosure rules require any such adjusted metric to be reconciled clearly to reported numbers.
Example
A Saudi industrial group reports SAR 800M net income, but it included a SAR 300M one-off gain from selling land. Adjusted ROA excludes that gain: with assets of SAR 12B, adjusted ROA = (800 − 300) / 12,000 = 4.2%, compared with reported ROA of 6.7%.