Return on Invested Capital
Also called: ROIC, return on capital employed, ROCE
ROIC measures after-tax operating profit against the capital actually invested in the business, debt and equity together. It's the number that matters most for long-term value creation: a company earning ROIC above its cost of capital creates value with every dollar it reinvests, and one earning below destroys value while still reporting a profit. The spread between ROIC and WACC is the whole game.
Formula
ROIC = NOPAT ÷ (Debt + Equity − Cash)
Want more than a definition? Learn it in Capital Quarters →