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 indicates the volatility or risk associated with an investment relative to the market as a whole. 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 measures how efficient a business is at using its assets to generate profits and gives investors an indication as to how well management teams are able manage their resources for maximum returns. Specifically, it takes net income divided by total assets which then allows for comparison across different companies or over time enabling better judgment calls when deciding whether or not investing in particular stocks may be beneficial.

By taking both Beta and ROA into consideration investors can gain a better understanding of potential risks associated with buying particular stocks as well as how efficiently those companies are likely utilizing their available resources allowing them to make more informed decisions overall thus helping reduce potential losses whilst also providing greater assurance for long-term gains.