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Glossary · investing

What is Return on invested capital (ROIC)?

After-tax operating profit divided by invested capital (debt + equity).

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ROIC is a cleaner efficiency measure than ROE because it neutralises capital structure. Compare ROIC to the company's cost of capital (WACC).

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Related terms

Return on equity (ROE)
Net income divided by shareholders' equity.
WACC (weighted-average cost of capital)
A blended cost of a company's debt and equity financing, weighted by capital structure.
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