ROIC Calculator
Calculate Return on Invested Capital to measure capital efficiency and value creation
Calculate Return on Invested Capital (ROIC)
Earnings before interest and taxes
Corporate tax rate percentage
Total shareholders' equity
Total interest-bearing debt
ROIC Results
Formula used: ROIC = NOPAT ÷ Invested Capital = [EBIT × (1 - Tax Rate)] ÷ (Equity + Debt)
NOPAT calculation: $0.00 × (1 - 0%) = $0.00
ROIC calculation: $0.00 ÷ $0.00 = 0.00%
Interpretation: Poor capital efficiency, below value creation threshold.
Capital Efficiency Analysis
Example Calculation
Company Example
EBIT: $50,000
Tax Rate: 25%
Equity: $121,500
Debt: $0
Calculation Steps
1. Calculate NOPAT = EBIT × (1 - Tax Rate)
= $50,000 × (1 - 0.25) = $37,500
2. Calculate Invested Capital = Equity + Debt
= $121,500 + $0 = $121,500
3. Calculate ROIC = NOPAT ÷ Invested Capital
= $37,500 ÷ $121,500 = 30.86%
4. Interpretation = Excellent ROIC, highly efficient capital use
ROIC Benchmarks
Excellent
Outstanding efficiency
Top-tier performance
Strong
Very good efficiency
Above average
Good
Solid performance
Market average
Threshold
Value creation
Minimum acceptable
Poor
Value destruction
Below threshold
ROIC Components
NOPAT
Net Operating Profit After Tax
Invested Capital
Total debt and equity capital
Capital Efficiency
How well capital generates returns
Value Creation
ROIC above cost of capital
Understanding Return on Invested Capital (ROIC)
What is ROIC?
Return on Invested Capital (ROIC) is a financial metric that measures how effectively a company uses its invested capital to generate profits. It shows the percentage return a company earns on every dollar of invested capital, making it crucial for evaluating management efficiency and investment attractiveness.
Why is ROIC Important?
- •Measures capital allocation efficiency
- •Identifies value creation vs. destruction
- •Compares performance across companies
- •Essential for investment decisions
ROIC Formula
ROIC = NOPAT ÷ Invested Capital
= [EBIT × (1 - Tax Rate)] ÷ (Debt + Equity)
- NOPAT: Net Operating Profit After Tax
- EBIT: Earnings Before Interest and Taxes
- Invested Capital: Total debt and equity
- Result: Percentage return on invested capital
Threshold: ROIC above 2% indicates value creation for shareholders.
ROIC vs Other Metrics
ROIC vs ROE
ROIC considers all invested capital (debt + equity), while ROE only looks at equity. ROIC provides a more comprehensive view of capital efficiency.
ROIC vs ROA
ROIC focuses on capital actively invested in operations, while ROA considers all assets. ROIC is better for evaluating operational efficiency.