Distinct from this site’s ROE and ROA calculators — ROIC divides after-tax operating profit by the capital actually deployed to fund operations, which is what lets it be compared directly against a company’s WACC.
How it works
NOPAT (operating income after tax) is divided by invested capital — total debt plus equity, minus idle cash sitting on the balance sheet. Excess cash isn’t part of what’s actually funding operations, so it’s excluded.
What this does not include
ROIC alone doesn’t say whether a company is creating value — that requires comparing it against the cost of the capital funding it, which is exactly what this site’s WACC calculator is built to estimate.
How to use this calculator
- Enter operating income (EBIT) and the tax rate.
- Enter total debt plus equity, and any cash to exclude.
Frequently asked questions
What does a ROIC above WACC mean?
The company is earning more on its invested capital than that capital costs — creating value. ROIC below WACC means the opposite, even if the company is profitable in an accounting sense.
Why subtract cash from invested capital?
Because idle cash isn’t funding operations — including it would understate ROIC by inflating the denominator with capital that isn’t actually at work.
How is ROIC different from ROE?
ROE divides by equity alone; ROIC divides by the full capital base (debt plus equity), which makes it comparable across companies with very different amounts of leverage.
