What is Return on Invested Capital (ROIC)?
ROIC measures how productively a company deploys ALL its capital — both debt and equity. It's leverage-neutral, which makes it a cleaner profitability indicator than ROE for comparing companies across capital structures. ROIC above the company's cost of capital means real economic value is being created.
Formula
ROIC = NOPAT ÷ (Debt + Equity − Cash)
How TopTier Strategy uses Return on Invested Capital (ROIC)
ROIC is a top-tier signal in our Returns pillar. We compare ROIC to estimated cost of capital to gauge true value creation.
Related Glossary Terms
Other concepts in the Returns pillar.
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