Valuation Terms
Return on Invested Capital
A measure of profit generated relative to the capital used in the business.
Also called: ROIC
What it means
Return on invested capital, or ROIC, looks at how effectively a company turns the capital invested in the business into after-tax operating profit. Many analysts consider it a strong measure of business quality when used carefully.
Why it matters
Companies that can reinvest at high returns for long periods can become very valuable.