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What is Return on Invested Capital?
The return a company earns on its total invested capital; a measure of capital allocation efficiency.
ExampleA company with ROIC above WACC creates value; otherwise it destroys value.The figures in the example illustrate the concept; they are not current market data.
Related terms
Return on EquityNet income divided by equity; it shows how efficiently management uses shareholders' capital.Weighted Average Cost of CapitalThe weighted average of a company's cost of equity and cost of debt; used as the discount rate in DCF.Free Cash FlowThe actual cash left after subtracting capital expenditures from operating cash flow.Return on AssetsNet income divided by total assets; it shows how efficiently a company uses all of its assets.Capital Expenditure (Capex)Investment spending to acquire or develop long-term assets.
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Frequently asked questions
What is Return on Invested Capital?
The return a company earns on its total invested capital; a measure of capital allocation efficiency.
What is Return on Invested Capital called in Turkish?
In Turkish financial reporting and news, Return on Invested Capital is called ROIC (Yatırılan Sermaye Getirisi).
Which concepts are related to Return on Invested Capital?
The concepts most often mentioned together with Return on Invested Capital are Return on Equity, Weighted Average Cost of Capital and Free Cash Flow.