ROIC, or return on invested capital, measures the return the business in generating, after taking into account all the investments required in the business. Effectively, ROIC is the ROI of the business as a whole. It is a metric, that while very important, often is overlooked by many business owners.
ROIC at first glance may not be immediately intuitive to many. It is a metric, like EBITDA, that does not appear on a standard income statement or balance sheet. It also requires calculations of multiple line items found on both the balance sheet and income statement. And the formula can be deconstructed to derive additional insights, further adding to the appearance of complexity (more on that in a later post).
But ROIC is powerful, and actually quite intuitive once you get past the arcane accounting language! Keep reading by clicking here!
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