ROIC stands for Return on Invested Capital.
ROIC is a calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments.
It is important to understanding the driver of profitability in order to identify its strengths and weakness and compare the performance against competitors, as well as against the historic performance of the company.
Formula to calculate ROIC.
If the Net Operating Profit After Tax (NOPAT) is $ 200,000, calculate the ROIC if the invested capital $ 500,000.
Therefore, the ROIC is 40%.