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Keep the selected convention visible
The numerator and capital base cover the same operating scope; the denominator is a defined average over the period.
| Input | Amount |
|---|---|
| NOPAT | 75 |
| Average operating invested capital | 600 |
| ROIC | 12.5% |
Inspect what the report excludes
Operating capital may exclude nonoperating balances under its chosen definition. Gross debt and equity funding are not automatically the same quantity. Read the reconciliation to operating assets and liabilities before substituting another balance.
Trace a changed ratio to its components
A higher ratio may reflect higher earnings, a smaller capital base or both. Write-offs and timing conventions can affect the base. The ratio alone does not identify a new operating improvement or a cash return to investors.
Keep a historical ratio distinct from a proposal
Comparing ROIC with a required return needs compatible assumptions. A retrospective measure across existing operations does not establish the future NPV of a new project with another schedule or risk.