RETURN ON INVESTED CAPITAL (ROIC)
Financial Dictionary — Financial Analysis
Definition
is a measure of how effectively a company uses the money (owned or borrowed) invested in its company operations. It is calculated by: net income after taxes / (total assets less excess cash minus non-interest-bearing liabilities).
Use cases, Example & Why it matters
Use cases
- Used to interpret financial statements and evaluate performance, liquidity, solvency, and efficiency.
- Used when comparing periods, peers, and forecasting outcomes.
- Used when comparing periods, peers, and forecasting outcomes.
Example
- Example: Analysts apply **RETURN ON INVESTED CAPITAL (ROIC)** to assess trends and compare the company with industry benchmarks.
Why it matters
- Why it matters: Turns raw numbers into insights, supports decision-making, and highlights risks and opportunities early.