One of the most widely used measures of financial performance is return on invested capital.
Return on investment (ROIC) is a measure of return on investment that represents recurring operating profit as a percentage of a company's net operating assets. The revenue indicator used is Earnings before interest and tax or EBIT and is not affected by the capital structure.
ROIC ratio shows how well a company uses externally procured funds to generate revenue. Comparing a company's rate of return on investment with the weighted average cost of capital (WACC) shows whether the invested capital is being used effectively.
ROI is calculated by subtracting the investment start value from the investment end value (equal to net income), dividing this new number (net income) by the investment cost, and multiplying by the end. 100.
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