FULL FORM OF ROIC

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         ROIC stand for Return on Invested Capital. It is a profitability or performance ratio which aims to measure the percentage return that a company earns on invested capital. The ratio shows how efficiently a company is utilising the investors funds to earn profit.

HOW ROIC IS CALCULATED

        Return on Invested capital is calculated by taking into account the cost of the investment and the returns generated. Returns include all the earnings acquired after taxes but before interest paid. The value of an investment is calculated by subtracting all current long term liabilities that is due within a year from the company's asset. The cost of investment will be total amount of asset a company requires to function its business. ROIC may be calculated by the following formula ---

      Return on Invested Capital =      Net operating profit after tax
                                                                ---------------------------------------------
                                                                Invested capital

    Company's growth can be evaluated by the return on invested capital ratio. Any company which earning excess return on investment totaling more than the cost of acquiring the capital is a value creator. Excess return may be reinvested by the company for the future growth of the company.      

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