ROIC (Return on Invested Capital)

ROIC measures how efficiently a company uses the money invested in it to generate profits. Think of it as a report card for management: if you give a company $100 to work with, ROIC tells you how much profit it squeezes out. You'll see this metric when analyzing whether a business is actually good at what it does, not just whether it's growing. A higher ROIC generally means management is making smart decisions with shareholder money. For example, Company A might generate $15 in annual profit from every $100 invested, while Company B only generates $8—that's a meaningful difference when deciding where your money goes. Most investors look for ROIC above 10% as a sign of a quality business.