ROIC, ROE, ROA and ROS are performance indicators of the ability of a company to generate profit from its business. The most important between them is ROIC.
- ROIC: return on invested capital. ROIC helps investors understand how well a company is using its capital to generate returns. A higher ROIC indicates that the company is using its capital efficiently and is generating value over and above the cost of that capital. It's calculated as EBITA*(1-TAX RATE)/CAPITAL INVESTED.
- ROE shows the profitability relative to shareholders' equity. A higher ROE indicates that the company is effectively generating income from the equity financing provided by shareholders.It's calculated as Net income / Equity
- ROA measures how efficiently a company uses its assets to generate profit. It indicates the effectiveness of the company in converting its assets into earnings.It's calculated as Net income / Total assets
- ROS indicates how much profit a company makes from its sales, before interest and taxes. A higher ROS suggests better operational efficiency and effective cost management, as it reflects the percentage of revenue that turns into profit. It's calcultaed as Operating income / Sales.