Return on Invested Capital (ROIC)

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Definition: Return on Invested Capital (ROIC)

ROIC is one of the profitability ratios used to analyze a company. It is used to calculate how effectively a company allocates its capital to profit generating investments. It is calculated as


ROIC    =           Net Income – Dividend

                                 Total Capital

Example:

Financial detail for company A for the year 2012 is given below:

Net Income  = 100 Crores

Dividend Expense = 10 Crores

Total Capital = 1000 crores


ROIC  = (100-10)/1000

          =  9%

1)      Return on Invested Capital (ROIC)

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