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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Differentiate between ROE and ROIC.

Summary Introduction

To explain: Difference between return on equity (ROE) and return on invested capital (ROIC).

Introduction:

Return on Equity (ROE): Return on equity represents the amount of return earned by equity shareholders; it can be calculated by dividing earnings available for equity shareholders to total equity capital.

Return on Invested Capital (ROIC): It represents the amount of return earned by all the investors; it can be calculated by dividing earnings available for investors to total invested capital.

Explanation

Formula to calculate return on equity,

Return on Equity=NetIncomeCommonEquity

Formula to calculate return on invested capital,

Return on Invested Capital=

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