Return on capital

This article does not cite any references or sources. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (April 2007)

Return on capital (ROC) Estimated by dividing the after-tax operating income by the book value of invested capital.

Formula

This differs from ROIC. return on invested capital (ROIC) is a financial measure that quantifies how well a company generates cash flow relative to the capital it has invested in its business. It is defined as net operating profit less adjusted taxes divided by invested capital and is usually expressed as a percentage. In this calculation, capital invested includes all monetary capital invested: long-term debt, common and preferred shares.

When the return on capital is greater than the cost of capital (usually measured as the weighted average cost of capital), the company is creating value; when it is less than the cost of capital, value is destroyed.

ROIC formula

Note that the numerator in the ROIC fraction does not subtract interest expense, because denominator includes debt capital.

External links

• return on invested capital definition and examples in simple text

See also

• Cash flow return on investment (CFROI)
• Profitability
• Rate of profit
• Tendency of the rate of profit to fall
• Return on assets (ROA)
• Return on equity (ROE)
• return on capital employed (ROCE)
• Return on investment (ROI)
• Return on net assets (RONA)
• Return on revenue (ROR), also Return on sales (ROS)
• Risk adjusted return on capital (RAROC)

This economics or finance-related article is a stub. You can help Wikipedia by expanding it.

More about Return_on_capital: return on capital employed roce, return on investment capital roic, return on capital employed, capital investment return, return on total capital, risk adjusted return on capital raroc, definition of return of capital, return on invested capital, return on average capital employed,