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:
“Given for one instant an intelligence which could comprehend all the forces by which nature is animated and the respective positions of the beings which compose it, if moreover this intelligence were vast enough to submit these data to analysis, it would embrace in the same formula both the movements of the largest bodies in the universe and those of the lightest atom; to it nothing would be uncertain, and the future as the past would be present to its eyes.”
—Pierre Simon De Laplace (1749–1827)
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—Aristotle (384–323 B.C.)