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Free ROIC Calculator Return on Invested Capital

This ROIC calculator is a tool that helps you determine the return on invested capital (ROIC). This business metric is genereally determined to measure how profitable a company is in investing the money it obtained from its shareholders.

More About Return On Invested Capital

Why is ROIC Essential?

ROIC is considered to be one the most reliable indicators of investments’ productivity, especially in the case of companies with a large amount of invested capital, such as mining companies or big manufacturing plants. However, one should be aware that it shows the overall return rather than the performance of individual assets. Basing on ROIC alone, it’s impossible to pick the investments that brought the most – or the least – profit. An in-depth analysis on the ROIC calculation can be done with the help of an on-demand CFO based on the requirement of the company stakeholders. 

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Understanding the Details

ROIC Formula

The return on invested capital formula has two basic elements:

  • NOPAT – net operating profit after tax. It can be calculated from EBIT (earnings before interest and taxes) with the following equation:

    NOPAT = EBIT * (1 - tax rate)

  • Invested capital – a sum of all debt and equity on the balance sheet of a company.

To calculate ROIC, we need to divide NOPAT by the invested capital. You can write the return on invested capital formula in two forms:

ROIC = NOPAT / invested capital or ROIC = [EBIT * (1 – tax rate)] / (debt + equity)

Founders may not directly understand the financial ratios required to present to investors and company stakeholders. Such important metrics can be translated into the founders’ language by experts at accountero. 

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