ROIC (Return on Invested Capital) Calculator

The ROIC Calculator calculates a business's return on invested capital by computing its net operating profit, once taxes and invested capital have been accounted for.

An organization's ROIC can be reached by filling in all the details of the form below, before opting to "Calculate ROIC".

ROIC Calculator

Net Income

Invested Capital

Understanding Return on Invested Capital

Calculating the return that a company accrued from the capital invested in its business is a useful means of assessing whether that company is prosperous. By comparing profit generated with the total money spent on resources to achieve that profit, a return on invested capital (ROIC) can be established.

A percentage is usually used for ROIC calculation, though sometimes a ratio may be used instead. A high metric shows that the company's operations are effective in generating revenues, indicating an efficacious application of invested capital. In contrast, a low ROIC can reveal there may be some underlying issues with shareholder investment not being applied effectively, and failing to result in any revenue increase. In assessing the relative efficacy of invested capital, ROIC can also be compared to WACC (Weighted Average Cost of Capital).

ROIC Formula

Calculating Return on Invested Capital is achieved by using the following formula:

Return on Invested Capital = NOPAT / IC

Where:

NOPAT represents net operating profit after taxes. Formula: EBIT × (1 − Tax Rate).

IC represents the invested capital. Formula: Short-Term Debt + Long-Term Debt + Shareholder Equity − Cash & Cash Equivalents − Goodwill

ROIC Calculation Case

In the event that a company has the following:

Earnings before interest and taxes of $400,000, tax rate of 40%, long-term debt of $700,000, short-term debt value of $800,000, shareholder equity of $10,000,000, cash and cash equivalents of $200,000, and goodwill of $100,000.

ROIC (%) = [ EBIT × (1 − Tax Rate) / (Short-Term Debt + Long-Term Debt + Shareholder Equity − Cash & Cash Equivalents − Goodwill) ] × 100

Return on Invested Capital (ROIC, %) = [ $400,000 × (1 − 0.4) / ($700,000 + $800,000 + $10,000,000 − $200,000 − $100,000) ] × 100 = 2.14%

According to the result of this calculation, the company's ROIC is 2.14%.

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