What is Return on Invested Capital (ROIC)?
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Return on Invested Capital (ROIC) measures how effectively a company uses all of its capital — both debt and equity — to generate profit. It is calculated as Net Operating Profit After Tax (NOPAT) divided by Invested Capital. A consistently high ROIC indicates a company has a durable competitive advantage.
Think about how well a company uses all its capital — debt and equity — to earn profit. A consistently high reading hints at a durable competitive edge.