Return on Invested Capital Calculator (ROIC)
Our Return on Invested Capital Calculator is easy to use for everyone. And gives immediate response to calculations.
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What is Return on Invested Capital?
ROIC is a metric that tells how much return the company earns from its invested capital. To calculate ROIC, first, we have to find out NOPAT (Net Operating Profit After Tax) and then divide NOPAT by invested capital. Invested capital means the company’s total equity and debt. Money invested to grow the business. For example, if a company’s NOPAT is $50,000 and invested capital is $250,000, then according to the formula, the ROIC will be 20%. This means the company is generating a return of 20% on its invested capital. It gives us an insider’s idea about the company’s efficiency and profitability. Friends, ROIC is important for investment because it measures the company’s long-term profitability and growth potential. To find good investment opportunities, you should focus on companies with high ROIC.
Return on Invested Capital calculation formula
Here's a of the components and a step-by-step example calculation -
Components - Net Operating Profit After Taxes (NOPAT) - NOPAT represents the company's operating profit after deducting taxes but before deducting interest expenses. The formula for NOPAT is NOPAT=Operating Income×(1−Taxes) Invested Capital - Invested Capital is the total capital employed in the business, including both equity and debt. The formula for Invested Capital is : Invested Capital=Total Equity+Total Debt−Non-Operating Assets
ROIC Formula -
ROIC Calculation Example
Example Calculation -
Get Financial Information -
gNon-Operating Assets - $ 200,000
Calculate NOPAT:
Calculate Invested Capital:
- Invested Capital=$ 2,000,000+$ 1,000,000−$ 200,000=$ 2,800,000
Plug in the Values into the ROIC Formula:
Here in this example, the Return on Invested Capital (ROIC) is calculated to be 14.29% .
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