IN PLAIN ENGLISH
Similar to ROE but includes debt. It measures how efficiently the company uses ALL its money (debt + equity) to generate profit, so borrowing can't flatter it the way it can flatter ROE.
FULL DEFINITION
Return on Invested Capital. Operating profit after tax as a share of all the money invested in the business by lenders and shareholders, for the company's latest financial year.
EXAMPLE
EBIT of £100m, a 25% tax rate and £500m of debt plus equity: ROIC = £75m ÷ £500m = 15%.
HOW IT'S CALCULATED
Worked out by the app from the company's latest annual report, not a rolling twelve months: ROIC = EBIT × (1 − tax rate) ÷ (total debt + total equity). EBIT, the effective tax rate, total debt and total equity (including minority interests) all come from the same financial year in the market data provider's annual statements. A company that reports no debt counts as debt-free. Shows N/A when there is no EBIT (banks and insurers don't report one) or no tax figure, or when debt plus equity is zero or negative.
Educational content only. It is not personal financial advice.