What is a stock's return on invested capital (ROIC)?

by matteo.zboncak , in category: Stocks and Equities , a year ago

What is a stock's return on invested capital (ROIC)?

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1 answer


by heather , 10 months ago


Return on invested capital (ROIC) is a financial metric that measures the profitability and efficiency of a company's invested capital. It is a key indicator for assessing the effectiveness of a company in generating returns relative to the capital invested in its operations.

ROIC is calculated by dividing a company's net operating profit after taxes (NOPAT) by its invested capital. Invested capital comprises both debt and equity, including long-term debt, shareholders' equity, and other long-term liabilities.

ROIC is expressed as a percentage and represents the profitability of a company's core operations after adjusting for taxes and the capital required to generate those profits. It helps investors evaluate the efficiency of a company in utilizing its capital to generate returns and is often compared to a company's cost of capital for assessing its financial performance.