Work out return on invested capital instantly with clear inputs, formula shown and shareable results.
ROIC is after-tax operating profit over the capital actually invested in the business. Value is created only when ROIC exceeds the cost of capital, and the spread multiplied by invested capital is the economic profit earned.
ROIC and economic profit
NOPAT = EBIT(1-t); ROIC = NOPAT / invested capital; EP = (ROIC - WACC) × IC
Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
ROE can be flattered by leverage. ROIC measures operating performance independently of how the business is financed.
Debt plus equity less cash, or equivalently net working capital plus net fixed assets — be consistent across years.