ROIC Calculator
From NOPAT and invested capital, compute ROIC: NOPAT ÷ invested capital × 100, the return on all capital (debt + equity) the business uses.
Input Data
Results
At a glance:ROIC shows the return on all capital employed. ROIC = NOPAT ÷ invested capital × 100, where NOPAT = operating income × (1 − tax rate) and invested capital = debt + equity. A ROIC above the cost of capital creates value.
Formula
ROIC = NOPAT ÷ invested capital × 100.
How to Use
- Enter the NOPAT.
- Enter the invested capital.
- Read the ROIC and compare with the cost of capital.
FAQ
What is the difference between ROIC and ROE?
ROE measures only shareholders' equity return and is magnified by leverage — borrowing more tends to lift ROE but raises risk. ROIC measures the return on all capital (equity plus debt) using NOPAT (before interest) as the numerator, so it is unaffected by financing mix and better reflects the core business's true earning power. Use both together to see how much leverage contributes to the return.
Why compare ROIC with WACC?
WACC is the cost of the capital used; ROIC is the return it produces. Only when ROIC exceeds WACC is value truly created — the return beats the cost. If ROIC stays below WACC, even with accounting profit the firm is destroying value because the return cannot cover the cost of capital. Thus a single ROIC figure is meaningless without WACC.
What is NOPAT and how is it estimated?
NOPAT (net operating profit after tax) = operating profit (EBIT) × (1 − effective tax rate), representing the after-tax operating profit assuming no debt. Using NOPAT rather than net profit strips out the interest effect so only the business itself is judged. Estimate with NOPAT = operating profit × (1 − tax rate), keeping the definition consistent with invested capital.
How do I compute invested capital, and where do I find HK-listed figures?
Invested capital = equity plus interest-bearing debt (short- and long-term borrowings), often minus non-operating cash. Equivalent from the asset side: net working capital + net fixed assets + other operating assets. Get the annual report from HKEXnews or the company's IR page: equity from the balance sheet, interest-bearing debt from current/non-current liabilities, cash from current assets. Prefer the average of opening and closing invested capital, and use multi-year trends to avoid one-off distortions.
What ROIC is good, and how should Hong Kong investors use it?
There is no universal pass mark; the golden rule is whether ROIC persistently and clearly exceeds WACC (roughly 3 points above is a good sign, reflecting a moat). Compare within the same industry — capital-intensive utilities, property and heavy industry naturally have lower ROIC than asset-light tech and consumer brands, so cross-sector comparison is unfair. Watch the multi-year trend, and read it with ROE to tell whether high return comes from operations or leverage. Pair it with the WACC and cost-of-equity calculators.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.