Calculate Return on Invested Capital to measure how efficiently a company uses its capital to generate profits.
ROIC measures a company's efficiency at allocating capital to profitable investments. It shows how well a company generates cash flow relative to the capital it has invested in its business.
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A company with strong operational efficiency and good capital allocation.
NOPAT: $15,000,000
Invested Capital: $75,000,000
Operating Income: $20,000,000
Tax Rate: 25%
A startup company with moderate profitability but high growth potential.
NOPAT: $2,000,000
Invested Capital: $15,000,000
Operating Income: $3,000,000
Tax Rate: 20%
A well-established company with stable operations and moderate returns.
NOPAT: $8,000,000
Invested Capital: $100,000,000
Operating Income: $12,000,000
Tax Rate: 30%
A company recovering from financial difficulties with improving performance.
NOPAT: $3,000,000
Invested Capital: $80,000,000
Operating Income: $5,000,000
Tax Rate: 25%