How to Calculate Return on Invested Capital (ROIC)

ROIC is a percentage that represents the rate of return a company makes on the cash it invests in its business. Read on for a simple way to calculate Return on Invested Capital.

Difficulty: Easy

Instructions

1. Calculate invested capital. Let's say you start a business to sell used books online. To get started, you purchase books to sell for $96 and spend $4 to list your items on eBay. Your total invested capital is $100.

2. Calculate net profit. Assume the books all sold on eBay for $150. Your net profit is $50 ($150 profit less $100 invested capital).

3. Calculate Return on Invested Capital. Divide net profit ($50) by total invested capital ($100) which is .50, or a 50% return (nice!).

4. This is a simplistic way to calculate Return on Invested Capital. To find the Return on Invested Capital for a publicly traded company, you can go online to MSN Money and look up a company by its stock ticker.