# Return on Invested Capital Calculator

The Return On Investment Calculator, or ROIC, is a tool that can be used to measure the profitability of a company. It is a simple calculation that takes into account the net income and the invested capital.

### Understanding Return on Invested Capital

#### What is the return on invested capital?

The return on invested capital, sometimes called return on capital (ROC), is a business metric that measures how well a company makes a profit based on invested capital. Invested capital is money raised via debt and equity (as opposed to operating income) to cover the cost of doing business, make a profit, and invest in future growth. The ROIC is a highly trusted profitability ratio, and it indicates a company’s productivity.

Businesses of all sizes and stages use equity and debt to grow. Equity refers to the value of assets like equipment. Debt is any form of borrowed money, including shares in the company sold during fundraising periods. It also includes long-term debt, such as mortgages.

#### What is the ROIC formula?

The return on invested capital formula is

ROIC = NOPAT / invested capital

Let’s break that down.

To calculate your ROIC, start by calculating your net operating profit after tax (NOPAT). To do so, multiply your earnings before interest and taxes (EBIT) by one minus your tax rate.

NOPAT = EBIT * (1 – tax rate)

You also need to know your total invested capital, which is the denominator in the equation. Invested capital is the book value of a company’s total debt and equity listed on the company’s balance sheet. To break the formula out, showing all the steps, it looks like this:

ROIC = [EBIT * (1 – tax rate)] / (debt + equity)

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