Return on Capital (ROC), Return on Invested Capital (ROIC) and Return on Equity (ROE): Measurement and Implications

ArXiv ID: ssrn-1105499 “View on arXiv”

Authors: Unknown

Abstract

No abstract found

Keywords: Unknown

Complexity vs Empirical Score

  • Math Complexity: 2.0/10
  • Empirical Rigor: 3.0/10
  • Quadrant: Philosophers
  • Why: The paper presents accounting-based metrics (ROC, ROIC, ROE) with basic algebraic formulas and conceptual discussions, lacking advanced mathematics or statistical modeling. It focuses on theoretical valuation and measurement principles rather than empirical backtesting or dataset-driven analysis.
  flowchart TD
    A["Research Goal: Measure & Compare<br>ROC, ROIC, and ROE"] --> B["Methodology: Theoretical Analysis<br>and Formula Derivation"]
    B --> C{"Data/Inputs:<br>Financial Statement Elements"}
    C --> D["Computation: Calculate<br>Three Key Ratios"]
    D --> E["Outcome 1: Distinct Definitions<br>ROC = EBIT / Capital<br>ROIC = NOPAT / Invested Capital<br>ROE = Net Income / Equity"]
    D --> F["Outcome 2: Measurement Implications<br>ROC/ROIC assess firm-wide efficiency<br>ROE assesses shareholder returns"]