**What is it?**

Return on Invested Capital is Net Operating Profit After Taxes (NOPAT; Operating Profit x (1 – tax rate)) divided by invested capital. The most common way to calculate invested capital is to add the book value of a company’s equity to the book value of its debt, then subtract non-operating assets, including cash and cash equivalents, marketable securities, and assets of discontinued operations.

**Who is interested?**

The financial community and investors.

**What does it tell me? **

Return on invested capital is a calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments.

The return on invested capital ratio gives a sense of how well a company is using its money to generate returns. Comparing a company’s return on invested capital to its weighted average cost of capital (WACC) reveals whether invested capital is being used effectively and creating economic value.