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ROIC: Definition And Formulae For Return On Invested Capital

ROIC is the true measure of a company's cash on cash returns.

It is calculates as NOPAT/Invested Capital or NOPAT/Revenue * Revenue/Invested Capital*.

It is the most important and truest measure of profitability. It is the key variable in calculating economic earnings.

*I recommend using average invested capital with adjustments for any acquisitions that close after the first day of the fiscal year.