ROIC — Return On Invested Capital
Definition: NOPAT divided by invested capital — the cleanest measure of how efficiently a business turns capital into profit. ROIC above the cost of capital is the definition of value creation.
Example
In board meetings, you'll often hear something like: "Let's pull the latest ROIC numbers before we make a call" — shorthand for return on invested capital.
When you'll hear it
ROIC shows up most often in board meetings, quarterly business reviews, and strategy off-sites. When someone uses it, they're usually referring to return on invested capital — and they expect the room to already know what that means.
FAQs
What does ROIC stand for?
ROIC stands for Return On Invested Capital.
What does ROIC mean in business and finance?
NOPAT divided by invested capital — the cleanest measure of how efficiently a business turns capital into profit. ROIC above the cost of capital is the definition of value creation.
Where will I hear ROIC used at work?
ROIC comes up most often in board meetings, quarterly business reviews, and strategy off-sites. It's used as shorthand for return on invested capital, so people assume you already know the term.