ROIC
Return on invested capital: after-tax operating profit per dollar of capital the business uses.
Formula
ROIC = EBIT × (1 − Tax rate) ÷ Invested capital
Inputs
- EBIT. Operating profit before interest and taxes.
- Tax rate. The effective rate the company paid.
- Invested capital. Debt plus equity put to work in the business.
How to read it
The cleanest single read on whether a business earns more than its capital costs — roughly 8–10% for a typical company.
How to use it
Compare with the cost of capital: a business earning above it creates value as it grows.
In Kereon
Investing · company. From the latest annual filing: EBIT (operating income when no EBIT line is filed) × (1 − that year's effective tax rate, or 21% when the rate is negative or above 60%) ÷ the filing's invested capital.
Also called: roic, return on invested capital.