What is ROIC,
How is it Calculated?
ROIC (Return On Invested Capital), which means return on invested capital, is a ratio used to measure profitability and performance of a company by giving the percentage return on invested capital. It is one of the important ratios used in company valuations. It allows those who fund the business with loans or equity to understand how much income is generated for the money they invest. ROIC = NOPAT (Net Operating Profit After Tax) / Invested Capital The ROIC is calculated by dividing NOPAT, or Net Operating Profit After Taxes, by the capital invested in the business. If we go over the two items used in the formula one by one, NOPAT is calculated with the net operating profit found by deducting the operational expenses from the gross profit. NOPAT is found by deducting the tax expense of continuing operations from this figure. The figure we get as a result of this calculation shows us the profit that the company will gain after the main activities and the tax it pays. The formula is as follows.
