ROIC
Business & Finance abbreviation · Finance
| Stands for | Return on invested capital |
|---|---|
| Categories | Business & Finance |
ROIC stands for Return on invested capital, a finance abbreviation.
Measure of how well a company generates operating profit from the capital provided by both shareholders and lenders, usually calculated as NOPAT divided by invested capital (debt plus equity, less excess cash). Comparing ROIC with WACC shows whether a business creates or destroys value.
Example: A company earning 14 percent ROIC with a 9 percent WACC is creating value with every dollar it reinvests.
Usage notes
Definitions of invested capital vary, so ROIC figures from different data providers are often not comparable. Valuation practitioners treat the spread between ROIC and WACC, together with growth, as the core driver of company value. Sustained high ROIC is frequently cited as evidence of a durable competitive advantage, or "moat."
Related abbreviations
More finance abbreviations
- RAROC – Risk-adjusted return on capital
- RCF – Revolving credit facility
- ROA – Return on assets
- ROCE – Return on capital employed
- ROE – Return on equity
- ROI – Return on investment
- ROS – Return on sales
- RRR – Required rate of return
- S&T – Sales and trading
- SAFE – Simple agreement for future equity
- SOTP – Sum of the parts
- SPA – Share purchase agreement