ROIC
Return on Invested Capital
Short definition
ROIC is NOPAT over invested capital. It measures the return on capital tied in the business, independent of financing; the spread to WACC is the basic value-creation test.
Detailed explanation
The numerator is NOPAT; the denominator is operating working capital plus net PPE (ex cash and financial investments), or equivalently equity plus net debt. Inconsistent denominators inflate or crush ROIC. Including goodwill mixes acquisition returns with organic returns.
Growth creates value only if ROIC exceeds WACC; otherwise sales growth destroys value. Working-capital bloat raises the denominator and cuts ROIC even as profit rises.
Why it matters for the CFO
Capex, M&A and capacity cases hang on this comparison. High ROE with low ROIC is a leverage story and breaks under stress. Dividends and borrowing can move ROE without moving ROIC.
How it is calculated
ROIC = NOPAT / Yatırılan sermaye
NOPAT is operating profit after a finance-independent tax. Invested capital is usually the average of opening and closing; year-end capital is more conservative in a heavy-investment year.
Variables in the formula
- ROIC: NOPAT / Invested capital
- NOPAT: EBIT × (1 − T) or cash-tax adjusted
- IC: Operating assets − operating liabilities (or equity + net debt)
How to read it
The ROIC − WACC spread is only as robust as the WACC and the tax on NOPAT. Inflation shrinks a historical-cost denominator and inflates ROIC. There is no universal hurdle; asset life, utilisation and the cycle dominate. A single-year ROIC at a cyclical peak or trough misleads.
Numerical example
NOPAT 60 mn TL, average invested capital 400 mn TL → ROIC = 60 / 400 = 15%.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.