Explain what Beta indicates. Select from any of the other financial data points or ratios, pick one and explain how it adds to the understanding of the company’s financial status.

Beta is a measure of the risk or volatility associated with a particular investment in comparison to the entire market. A higher beta means that an investment is more sensitive to market volatility than those of lower betas, while a negative beta indicates that the asset’s performance moves in the opposite direction of the overall market.

The return on assets (ROA) ratio is one financial data point that can provide additional insight into a company’s financial status. ROA is a measure of how efficiently a company uses its assets to produce profits. It also gives an investor an idea as to the management team’s ability to manage resources to maximize returns. It divides net income by the total assets, allowing for comparisons across companies and over time. This allows better judgement calls to be made when deciding if investing in certain stocks is beneficial.

Investors can make better decisions by taking into account both ROA and Beta. This will help them reduce the risk of making a bad investment decision.