Return on Invested Capital

Definition

Return on Invested Capital (ROIC) is a measure of how well a company generates profits from the capital it has invested in its operations. It considers both equity and debt investments. A higher ROIC indicates that the company is generating more profit for each dollar of invested capital. It helps investors and analysts assess a company’s efficiency in utilizing its capital to generate returns.

Further Explanation

Return on Invested Capital (ROIC) is a financial metric that measures the profitability of a company’s investments in both debt and equity. It evaluates how effectively a company generates returns from the capital invested in its operations.

ROIC considers the total capital employed in the business, which includes both equity and debt. It takes into account the net operating profit after taxes (NOPAT) and divides it by the total invested capital. The formula for calculating ROIC is as follows:

ROIC = NOPAT / Total Invested Capital

A higher ROIC indicates that the company is generating more profit per unit of capital invested. It is a measure of efficiency and effectiveness in utilizing capital to generate returns.

ROIC is a valuable tool for investors and analysts to assess a company’s ability to generate profits from its invested capital. It helps in comparing the performance of companies in the same industry or sector. However, it’s important to consider other financial factors and industry benchmarks when evaluating a company’s overall financial performance.

Why Appoint Valtech as Valuation Adviser?

Valtech’s team has provided valuation advice to over 200 listed companies in Hong Kong, China, Singapore, Taiwan, Australia, the United Kingdom, the United States and Germany.

Valtech Valuation is a professional valuation firm accredited with ISO-9001 in valuation advisory services. The financial market and valuation requirements are highly dynamic. We are determined to develop and maintain a quality management system to foster an environment which is sustainable and evolving continuously. Our founders stress on development of a system and an environment that our consultants are provided with necessary support and opportunities to thrive.

We are a team of professionals from multiple disciplines including audit, financial modelling, tax, internal control and surveying. Our management adheres professional excellence. Abundant resources are reserved to develop standardized policies and procedures for quality control. We have solid track record in valuation advisory for listed companies, private equity, fund managers and financial institutions. We work closely with big four and other international accounting firms, corporate financial advisors, fund managers and legal advisors.

Valtech Advantages:

Advanced Valuation Techniques: Valtech Valuation can develop and implement advanced valuation techniques that are specifically tailored to the needs of clients. These techniques can go beyond traditional valuation methods and incorporate factors such as market trends, industry benchmarks, and risk analysis to provide more accurate and insightful valuations.

Customized Valuation Models: Valtech Valuation can create customized valuation models that align with the unique investment strategies and asset classes. By understanding the specific requirements and objectives of these entities, Valtech Valuation can develop models that capture the nuances of their portfolios, resulting in more precise and relevant valuations.

Data-driven Insights: Valtech Valuation can leverage its access to comprehensive data sources and analytics tools to provide data-driven insights. By analyzing market data, economic indicators, and performance metrics, Valtech Valuation can offer valuable insights into the valuation of assets, identify emerging trends, and help inform investment decision-making.

Adherence to Compliance and Reporting Standards: Valtech Valuation can ensure that valuation practices adhere to regulatory compliance and reporting standards. By staying updated on relevant regulations, such as accounting standards and industry guidelines, Valtech Valuation can help clients meet their reporting obligations accurately and in a timely manner.