Return on Invested Capital (ROIC)
Return on Invested Capital (ROIC) is another popular metric that is used widely in financial analysis. The reason for its popularity is that like ROA, ROIC can be used by both equity and debt holders. Also, like ROA, it provides data about return to the company as a whole and is not affected by leverage. Here is more about Return on Invested Capital;
The formula for calculating ROIC is as follows:
Return on Invested Capital = EBIT / Invested Capital
The Return on Invested Capital (ROIC) metric measures the companys efficiency at allocating its resources to generate the maximum return. Thus ROIC shows the relationship between invested capital and return. It must be thought about as having Rs X in earnings for every rupee in invested capital.
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