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Finance Dictionary and Glossary of Investment Terms
Return on Invested Capital
Definition 1.
ROIC. A measure of how effectively a company uses the money (borrowed or owned) invested in its operations. Calculated by: net income after taxes / (total assets less excess cash minus non-interest-bearing liabilities).
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Definition 2.
Latest 12 months'' net income divided by the most recent quarter invested capital (long-term debt plus common stock equity plus preferred equity). The five-year average is also given. Also known as return on investment, this ratio is a measure of how effectively management is using the scarce capital at its disposal.
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