ROIC Calculator
Calculate return on invested capital from EBIT, an effective tax rate and average invested capital.
Enter your values
How this calculator works
ROIC estimates after-tax operating return on the capital invested in the business, before financing choices.
Formula
Worked example
$20 million of EBIT at a 25% tax rate gives $15 million of NOPAT; on $125 million average invested capital, ROIC is 12%.
How to interpret the result
ROIC estimates after-tax operating return on the capital invested in the business, before financing choices.
Assumptions & limitations
Invested-capital definitions vary among analysts. Use consistent treatment of cash, debt, leases, goodwill and operating liabilities when comparing companies.
Practical context
When this calculator is useful
ROIC is useful when examining how efficiently a business turns long-term operating capital into after-tax operating profit. It is particularly informative for comparing capital allocation quality over time.
How investors commonly use it
Investors often compare ROIC with the company’s estimated cost of capital and with historical ROIC. Persistently strong returns on invested capital can indicate an efficient business model, but the source and durability of those returns still require analysis.
What ROIC does not tell you
ROIC depends heavily on how NOPAT and invested capital are defined. Acquisitions, goodwill, leases, restructuring and excess cash can materially change the ratio, so figures calculated from different data sources may not be directly comparable.