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Return on Invested Capital (ROIC) Calculator

Formula

The formula to calculate the Return on Invested Capital (ROIC) is:

$\text{ROIC} = \frac{\text{NOPAT}}{\text{Invested Capital}} \times 100\%$

Where NOPAT is calculated as:

$\text{NOPAT} = \text{EBIT} \times (1 - \text{tax rate})$

And Invested Capital is the sum of debt and equity:

$\text{Invested Capital} = \text{Debt} + \text{Equity}$

Description

Return on Invested Capital (ROIC) measures a company's efficiency at allocating the capital under its control to profitable investments. It indicates how well a company is using its money to generate returns.

Example Calculation

Let's assume the following:

EBIT: $50,000
Tax Rate: 25%
Total Debt: $0
Total Equity: $121,500

To calculate the NOPAT:

$\text{NOPAT} = 50,000 \times (1 - 0.25) = 37,500$

To calculate the Invested Capital:

$\text{Invested Capital} = 0 + 121,500 = 121,500$

To calculate the ROIC:

$\text{ROIC} = \frac{37,500}{121,500} \times 100\% \approx 30.86\%$

Therefore, the Return on Invested Capital (ROIC) is approximately 30.86%.