- Return on capital
**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 byInvested Capital and is usually expressed as apercentage . 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 theweighted average cost of capital ), the company is creating value; when it is less than the cost of capital, value is destroyed.**Basic formula***$ROIC\; =\; (Net\; Operating\; Profit\; Less\; Adjusted\; Taxes)/(Invested\; Capital)$

Note that the numerator in the ROC fraction does not subtract

interest expense , because demoninator includes debt capital.**See also***

Cash flow return on investment (CFROI)

*Cash return on gross investment (CROGI)

*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), alsoReturn on sales (ROS)

*Risk adjusted return on capital (RAROC)

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