Quick Definition

Return on Invested Capital (ROIC) is a profitability ratio that measures how effectively a company uses its capital to generate profits.

Formula

Examples

• 1A company with a total capital of $100 million and an after-tax operating profit of $15 million has an ROIC of 15%.
• 2If a business invests $50 million into new equipment and generates an additional $10 million in profits, the ROIC for that investment is 20%.
• 3Comparing two companies in the same industry, one with an ROIC of 12% and another with 8%, helps investors identify which company is using its capital more efficiently.

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