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Definition – What is the ROIC (Return on Investment Capital)?
Return on investment capital is the return on money invested. It is listed as a percentage.
Formula – How to calculate ROIC
ROIC = ((Net Income – Dividends) / Total Capital) x 100%
Example
A company has net income of $10,000, dividends of $5,000, and total capital of $5,000.
ROIC = (($10,000 – $5,000) / $5,000) x 100% = ($5,000 / $5,000) x 100% = 1.000 x 100% = 100.00%
Therefore, this company has an ROIC of 100%.
Sources and more resources
- Wikipeida – Return on Capital – Wikipedia’s entry on ROC or ROIC. Includes the formula and a discussion on how it is calculated.
- The Balance – How Return on Invested Capital is Calculated – Some notes on calculating and interpreting ROIC.
- Investopedia – Return on Invested Capital – ROIC – A lengthy article on ROIC.