More on ROIC……….

It is not whether you are right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.- Stanley Druckenmiller

ROIC

First discussed here:http://wp.me/p1PgpH-v0

Greenblatt’s discussion of ROIC plus www.fool.com’s series of articles on ROIC so you can understand different approaches.

http://www.scribd.com/doc/83548528/ROIC-Greenblatt-and-Fool-Articles

For beginners or those who need a refresher, a Khan Academy Video on return on capital:

http://www.khanacademy.org/humanities ---other/finance/core-finance/v/return-on-capital 

One response to “More on ROIC……….

  1. Thanks – the two ROIC posts & PDFs helped clear up my thinking on the topic. I think the key is to think of in terms of how much cash must be deployed to generate the EBIT. From that point of view, excess retained cash / investments should be excluded and premiums paid to other shareholders (goodwill) for their assets should be excluded too.

    The BS slides on the 4 drivers of value are quite interesting – a more complete framework for deciding just how “wonderful” a business is than just examining ROIC alone.

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