Evaluate how effectively a company uses its assets, equity, and invested capital to generate profit.
Business Metrics
Efficiency Ratios
ROIC (Return on Invested Capital)18.6%Most Accurate Efficiency Measure
ROA15.0%
ROE25.0%
Comparison of Return Metrics (%)
About this calculator
Overview
Evaluate how effectively a company uses its assets, equity, and invested capital to generate profit.
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Pro Tips
What is ROA?: Return on Assets (ROA) measures how much profit a company earns for every dollar of assets it owns. It shows how efficient management is at using its physical and intangible resources.
What is ROE?: Return on Equity (ROE) measures the return on the money provided by shareholders. It is a key metric for investors but can be artificially inflated by taking on high levels of debt.
Why is ROIC important?: Return on Invested Capital (ROIC) is often considered the best measure of efficiency. It compares operating profit (after tax) to the cost of all capital (debt and equity) used to generate that profit.
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Fun Facts
"Software companies often have massive ROAs because they have very few physical assets (machinery, inventory) compared to their profits."
"The 'DuPont Analysis' breaks ROE down into three component parts: profit margin, asset turnover, and financial leverage."
"If ROIC is consistently higher than a company's WACC, the company is creating value and is likely to grow its stock price over time."
