ROIC (Return on Invested Capital) measures the return the business generates on the operating capital it really needs to run: invested capital. It is calculated as NOPAT (net operating profit after tax) over invested capital (equity + net financial debt). It is an indicator of business quality and of its ability to create value when compared with WACC: if ROIC exceeds WACC, every euro reinvested increases the value of the company; if it is below, it destroys value. ROI (Return on Investment), on the other hand, is a more tactical, project- or campaign-specific indicator: it measures the return on a specific investment (for example, a project, a marketing campaign or opening a shop) by comparing the profit attributable to that investment with the amount invested. In short: ROIC assesses how effectively the company uses its operating capital as a whole; ROI assesses the return on a specific investment.

• NOPAT (EBIT · (1−t))
• Invested capital = Equity + Net financial debt
• Profit attributable to the investment (for ROI)
• Amount invested (for ROI)

• ROIC > WACC → the business creates value; ROIC < WACC → it destroys value (even if there is accounting profit).
• ROIC assesses the quality of the core business's returns; ROI measures the return on specific initiatives or projects.
• A high, stable ROIC usually reflects competitive advantages (pricing, costs, asset turnover) and good capital discipline.
• Beware of distortions: excess cash (subtract it for net financial debt), undervalued assets or non-capitalised intangibles can inflate/deflate ROIC.
• Capital-intensive sectors tend to have lower ROIC; always compare it with peers and with its own WACC.
• ROI is useful for deciding whether to continue, scale up or stop specific investments; ROIC is used to judge the capital allocation of the business as a whole.

• ROI
• ROE
• ROA
• WACC