ROIC is one of the best measures of business quality. Companies that earn ROIC well above their cost of capital for years – often thanks to a competitive moat – tend to create the most shareholder value.
How to use the ROIC Calculator – Return on Invested Capital
- EBIT
- Tax rate
- Equity
- Debt
- Cash (excess)
- WACC (for comparison)
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter EBIT, tax rate, equity, debt, cash and WACC.
Tips
- Take figures from the same financial statements and the same fiscal year.
- Compare ratios with companies in the same industry, not across industries.
- Use several valuation measures together; no single ratio tells the whole story.
- Market prices change every second – refresh the share price before you rely on a result.
Common mistakes to avoid
- Mixing per-share figures with company totals.
- Using trailing earnings for one company and forward earnings for another.
- Forgetting dilution from options and convertible securities.
Inputs explained
| Field | What to enter |
|---|---|
| EBIT | Amount in your currency |
| Tax rate | In % |
| Equity | Amount in your currency |
| Debt | Amount in your currency |
| Cash (excess) | Amount in your currency |
| WACC (for comparison) | In % |
What each result means
- NOPAT = [EBIT]×(1 – [Tax rate]÷100)
- Invested capital = [Equity] + [Debt] – [Cash (excess)]
- Return on invested capital (ROIC) = [NOPAT]÷[Invested capital]×100
- Value spread (ROIC − WACC) = [Return on invested capital (ROIC)] – [WACC (for comparison)]
- Economic value added = [Invested capital]×[Value spread (ROIC − WACC)]÷100
Example values
How the main result changes when EBIT changes and everything else stays at the example values above:
| EBIT | Return on invested capital (ROIC) (%) |
|---|---|
| 25,000,000 | 7.05 |
| 37,500,000 | 10.58 |
| 50,000,000 | 14.11 |
| 62,500,000 | 17.63 |
| 75,000,000 | 21.16 |
| 100,000,000 | 28.21 |
Formula
NOPAT = EBIT × (1 − tax rate)Invested capital = equity + debt − cashROIC = NOPAT ÷ invested capital; value spread = ROIC − WACCWorked example
Inputs — EBIT: $50,000,000; Tax rate: 21 %; Equity: $180,000,000; Debt: $120,000,000; Cash (excess): $20,000,000; WACC (for comparison): 9 %.
Results — NOPAT = $39,500,000.00; Invested capital = $280,000,000.00; Return on invested capital (ROIC) = 14.11 %; Value spread (ROIC − WACC) = 5.11 %; Economic value added = $14,300,000.00.
Frequently asked questions
What is a good ROIC?
Above the company's WACC; 15%+ is excellent.
How is ROIC different from ROE?
ROIC includes debt-funded capital, so it isn't boosted by leverage.
Should cash be subtracted?
Usually excess cash is excluded because it isn't used in operations.
What formula does the ROIC Calculator – Return on Invested Capital use?
NOPAT = EBIT × (1 − tax rate).