ROIC Calculator (Return on Invested Capital)
Calculate return on invested capital from NOPAT and invested capital, and compare it against WACC to determine whether the business is creating or destroying economic value.
💰 Profitability📐 ROIC = NOPAT / invested capital; NOPAT = EBIT × (1 − tax rate)💼 Business
EBIT (operating profit)
Tax rate (%)
Total debt
Shareholders' equity
Cash and equivalents (excluded)
WACC for comparison (%)
Please enter valid values.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| ROIC Calculator (Return on Invested Capital) | — | ROIC = NOPAT / invested capital; NOPAT = EBIT × (1 − tax rate) | percent |
Step-by-Step Examples
Example 1
Value Creating
EBIT 900,000, tax 21%, debt 2M, equity 3M, cash 400,000, WACC 9%.
- NOPAT = 900,000 × 0.79 = 711,000
- Invested capital = 2M + 3M − 0.4M = 4.6M
- ROIC = 711,000 / 4,600,000 = 15.46%
- Spread = 15.46% − 9% = +6.46 points
- EVA = 6.46% × 4.6M = 297,160
✓ ROIC 15.46% — creating value
Example 2
Value Destroying
EBIT 300,000, tax 21%, debt 3M, equity 2M, cash 200,000, WACC 10%.
- NOPAT = 237,000
- Invested capital = 4.8M
- ROIC = 4.94%
- Spread = 4.94% − 10% = −5.06 points
- Growing this business destroys value
✓ ROIC 4.94% — below cost of capital
Example 3
Capital Light
EBIT 500,000, tax 21%, debt 0, equity 1M, cash 300,000, WACC 11%.
- NOPAT = 395,000
- Invested capital = 0 + 1M − 0.3M = 700,000
- ROIC = 56.43%
- Very high ROIC is characteristic of capital-light business models
✓ ROIC 56.43% — capital-light
Real-World Applications
Value Creation Test
The ROIC minus WACC spread is the cleanest single test of whether a business creates economic value.
Capital Structure Neutral
Unlike ROE, ROIC is unaffected by how the business is financed, making it better for comparing operating performance.
Growth Quality
Growth only creates value when ROIC exceeds WACC. Below that, growing faster destroys value faster.
Moat Indicator
Sustained high ROIC is often taken as evidence of a durable competitive advantage.
Common Mistakes to Avoid
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Including excess cash in invested capital
Cash not required for operations should be excluded, otherwise cash-rich businesses show artificially depressed ROIC.
⚠️
Using net income instead of NOPAT
Net income is after interest, which reintroduces capital structure effects. NOPAT strips financing out, which is the entire point of ROIC.
⚠️
Ignoring the WACC comparison
ROIC in isolation says little. A 12% ROIC is excellent against an 8% WACC and value-destroying against a 15% one.
Frequently Asked Questions
What is ROIC? ▾
Net operating profit after tax divided by invested capital — measuring the return generated on all capital employed, regardless of whether it came from debt or equity.
What is NOPAT? ▾
Net operating profit after tax, calculated as EBIT multiplied by one minus the tax rate. It represents operating profit with financing effects removed.
Why compare ROIC to WACC? ▾
Because a business only creates value when the return on its capital exceeds the cost of that capital. The spread between them is economic profit.
How does ROIC differ from ROE? ▾
ROE measures return to shareholders and rises with leverage. ROIC measures return on all capital and is unaffected by capital structure.
What is a good ROIC? ▾
Anything meaningfully above WACC. In absolute terms, sustained ROIC above 15% is often regarded as strong, though capital-light businesses routinely exceed this.