Return on Invested Capital: ROIC
A reader asked about calculating ROIC:
There is no perfect way to determine ROIC.
1. Do you use net PPE or Gross PPE?
2. What happens when you ignore goodwill in your calculation?
3. How do you calculate excess cash?
4. Do you adjust the way you calculate ROIC depending upon the type of industry?
5. What is more important a 100% ROIC vs. a 200% ROIC or being able to redeploy that capital at high rates?
I will write-up my response but read the PDF from Bear Stearns on ROIC to think about the subject.