Return on Capital (ROC)
Difficulty: Advanced
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company's debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
Amazon.com Inc., ROIC calculation
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (USD $ in millions) | ||||||
| | Net operating profit after taxes (NOPAT)1 | 3,556 | 4,500 | 2,356 | 356 | 673 |
| | Invested capital2 | 84,152 | 45,656 | 35,260 | 30,413 | 17,996 |
| Ratio | ||||||
| | ROIC3 | 4.23% | 9.86% | 6.68% | 1.17% | 3.74% |
Source: Based on data from Amazon.com Inc. Annual Reports
2017 Calculations
1 NOPAT. See Details »
2 Invested capital. See Details »
3 ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 3,556 ÷ 84,152 = 4.23%
| Ratio | Description | The company |
|---|---|---|
| ROIC | A measure of the periodic, after tax, cash-on-cash yield earned in the business. | Amazon.com Inc.'s ROIC improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |