Advanced English Dialogue for Business – Return on invested capital

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.