Listen to a Business English Dialogue about Return on invested capital
Justin: Hey Harper, do you know what return on invested capital (ROIC) means in finance?
Harper: Yeah, I think it’s a measure of how efficiently a company uses its capital to generate profits.
Justin: That’s correct. ROIC indicates the percentage of return a company earns on the capital invested in its operations.
Harper: How is ROIC calculated?
Justin: It’s calculated by dividing the company’s net operating profit after taxes (NOPAT) by its invested capital.
Harper: Are there any benefits to analyzing ROIC?
Justin: Definitely. ROIC helps investors assess a company’s profitability and efficiency in generating returns for its shareholders.
Harper: Can ROIC be compared across different companies and industries?
Justin: Yes, ROIC can be used to compare companies within the same industry or across different industries to identify those that are more effective at deploying capital.
Harper: Thanks for explaining that, Justin. ROIC seems like a valuable metric for investors to consider.
Justin: No problem, Harper. It’s an important tool for evaluating a company’s financial performance and potential for long-term growth.
