{
  "id": "roic",
  "version": "6be245a6cae3",
  "status": "published",
  "name": "ROIC Calculator",
  "question": "What is my ROIC?",
  "summary": "Computes return on invested capital (ROIC): operating income after tax (NOPAT) divided by debt plus equity minus cash, as a percent.",
  "category": "finance",
  "subcategory": "investing",
  "url": "https://www.acalculator.org/finance/roic-calculator",
  "markdown": "https://www.acalculator.org/finance/roic-calculator.md",
  "kind": "function",
  "method": "NOPAT = EBIT × (1 − tax rate ÷ 100). Invested capital = debt + equity − cash. ROIC = NOPAT ÷ invested capital × 100.",
  "assumptions": [
    "Debt and equity are book values from the balance sheet, for example at the start of the year or the average of the start and end.",
    "The tax rate applies to all of operating income; an operating loss is taxed at the same rate (it saves tax).",
    "Arithmetic is exact on the typed decimals; ROIC shows to 2 decimals and money to the cent, halves up."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "ebit": {
        "title": "Operating income (EBIT)",
        "description": "Earnings before interest and taxes for the year. Negative for an operating loss.",
        "type": "number",
        "x-unit": "USD",
        "minimum": -1000000000000000,
        "maximum": 1000000000000000
      },
      "tax": {
        "title": "Tax rate",
        "description": "The income tax rate on operating income, for example the effective or marginal rate.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 100
      },
      "debt": {
        "title": "Debt",
        "description": "Book value of short-term and long-term borrowing on the balance sheet.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000000
      },
      "eq": {
        "title": "Shareholders’ equity",
        "description": "Book value of equity on the balance sheet. Negative for a deficit.",
        "type": "number",
        "x-unit": "USD",
        "minimum": -1000000000000000,
        "maximum": 1000000000000000
      },
      "cash": {
        "title": "Cash and marketable securities",
        "description": "Cash the business does not need to run, taken off the capital. Optional.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000000
      }
    }
  },
  "outputs": {
    "roic": {
      "label": "Return on invested capital (ROIC)",
      "description": "NOPAT ÷ invested capital × 100.",
      "format": "percent"
    },
    "nopat": {
      "label": "NOPAT (operating income after tax)",
      "description": "EBIT × (1 − tax rate).",
      "format": "money"
    },
    "capital": {
      "label": "Invested capital",
      "description": "Debt + equity − cash.",
      "format": "money"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "ebit": 1000000,
      "tax": 25,
      "debt": 2000000,
      "eq": 3500000,
      "cash": 500000
    },
    "outputs": {
      "roic": 15,
      "nopat": 750000,
      "capital": 5000000
    },
    "text": "Operating income of $1,000,000.00 taxed at 25% leaves NOPAT of $750,000.00; on invested capital of $5,000,000.00, ROIC is 15%."
  },
  "examples": [
    {
      "given": {
        "ebit": 1000000,
        "tax": 25,
        "debt": 2000000,
        "eq": 3500000,
        "cash": 500000
      },
      "expect": {
        "roic": 15,
        "nopat": 750000,
        "capital": 5000000
      },
      "source": "Aswath Damodaran, NYU Stern, Variables used in Data Set (ROC or ROIC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash); invested capital = book value of equity + book value of debt − cash). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm; hand calculation in content.mdx: 1,000,000 × (1 − 0.25) = 750,000; 2,000,000 + 3,500,000 − 500,000 = 5,000,000; 750,000 ÷ 5,000,000 = 15%"
    },
    {
      "given": {
        "ebit": 120000,
        "tax": 0,
        "debt": 300000,
        "eq": 500000
      },
      "expect": {
        "roic": 15,
        "nopat": 120000,
        "capital": 800000
      },
      "source": "Aswath Damodaran, NYU Stern, Variables used in Data Set (ROC or ROIC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash); invested capital = book value of equity + book value of debt − cash). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm; hand calculation in content.mdx: 120,000 ÷ (300,000 + 500,000) = 15%"
    },
    {
      "given": {
        "ebit": -80000,
        "tax": 22.5,
        "debt": 400000,
        "eq": 900000,
        "cash": 60000
      },
      "expect": {
        "roic": -5,
        "nopat": -62000,
        "capital": 1240000
      },
      "source": "Aswath Damodaran, NYU Stern, Variables used in Data Set (ROC or ROIC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash); invested capital = book value of equity + book value of debt − cash). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm; hand calculation in content.mdx: −80,000 × 0.775 = −62,000; −62,000 ÷ 1,240,000 = −5%"
    },
    {
      "given": {
        "ebit": 43000,
        "tax": 21,
        "debt": 50000,
        "eq": 100000
      },
      "expect": {
        "roic": 22.64666666666667,
        "nopat": 33970,
        "capital": 150000
      },
      "source": "OpenStax, Principles of Finance, 6.4 Solvency Ratios (Clear Lake Sporting Goods: EBIT $43,000, equity $100,000) and 5.5 The Statement of Cash Flows (notes payable $50,000). https://openstax.org/books/principles-finance/pages/6-4-solvency-ratios; hand calculation in content.mdx: 43,000 × 0.79 = 33,970; 33,970 ÷ 150,000 = 22.65% (exact 3397/150, Python Fraction)"
    }
  ],
  "sources": [
    "Aswath Damodaran, NYU Stern School of Business, Variables used in Data Set: return on capital or return on invested capital = after-tax operating income ÷ book value of invested capital, ROC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash); invested capital = book value of equity + book value of debt − cash. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm (retrieved 2026-10-19)",
    "Aswath Damodaran, The Little Book of Valuation, Measures of Profitability: return on capital relates operating income to the capital invested in the firm, the book value of debt and equity net of cash and marketable securities; after-tax ROC = EBIT (1 − t) ÷ (BV of debt + BV of equity − cash). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook/profitability.htm (retrieved 2026-10-19)",
    "OpenStax, Principles of Finance, 6.4 Solvency Ratios: operating income is earnings before interest and taxes (EBIT); Clear Lake Sporting Goods has EBIT of $43,000 and stockholder equity of $100,000. https://openstax.org/books/principles-finance/pages/6-4-solvency-ratios (retrieved 2026-10-19)"
  ],
  "related": [
    "nopat",
    "roi",
    "wacc",
    "operating-income"
  ],
  "changelog": []
}