Formula
This differs from ROIC. Return on invested capital (ROIC) is a financial measure that quantifies how well a company generates cash flow relative to the capital it has invested in its business. It is defined as net operating profit less adjusted taxes divided by invested capital and is usually expressed as a percentage. In this calculation, capital invested includes all monetary capital invested: long-term debt, common and preferred shares.
When the return on capital is greater than the cost of capital (usually measured as the weighted average cost of capital), the company is creating value; when it is less than the cost of capital, value is destroyed.
Read more about this topic: Return On Capital
Famous quotes containing the word formula:
“I feel like a white granular mass of amorphous crystals—my formula appears to be isomeric with Spasmotoxin. My aurochloride precipitates into beautiful prismatic needles. My Platinochloride develops octohedron crystals,—with a fine blue florescence. My physiological action is not indifferent. One millionth of a grain injected under the skin of a frog produced instantaneous death accompanied by an orange blossom odor.”
—Lafcadio Hearn (1850–1904)
““It’s hard enough to adjust [to the lack of control] in the beginning,” says a corporate vice president and single mother. “But then you realize that everything keeps changing, so you never regain control. I was just learning to take care of the belly-button stump, when it fell off. I had just learned to make formula really efficiently, when Sarah stopped using it.””
—Anne C. Weisberg (20th century)
“So, if we must give a general formula applicable to all kinds of soul, we must describe it as the first actuality [entelechy] of a natural organized body.”
—Aristotle (384–323 B.C.)