Incremental Return on Invested Capital (ROIIC)

Financial metric definition and guide.

Incremental Return on Invested Capital (ROIIC)

When a company deploys new capital, what return does it earn?

Definition

ROIIC measures the return on incremental capital deployed — the change in NOPAT divided by the change in IC. It reveals whether recent investments are creating or destroying value.

Formula

Where is the lookback period (default: 3 years).

A negative with positive (capital returned while profits grew) is the most favorable scenario.

Interpretation

Range Assessment
> 15% Excellent — new investments are highly productive
10% – 15% Good — investments earn adequate returns
< 10% Marginal — new capital earns below average returns
< 0% Destructive — recent investments are losing money

In Finsco

Computed by the audit returns command. The lookback period is configurable via --lag (default: 3 years).

audit returns --lag 5

Related Metrics

  • ROIC — average return on all invested capital
  • CapEx Intensity — how much OCF goes to capital expenditure