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Relying solely on Return on Invested Capital (ROIC) for investment decisions can be risky because it doesn't take into account other important factors such as market conditions, company's financial health, industry trends, and management quality. ROIC is a measure of a company's efficiency in using its capital to generate profits, but it doesn't provide a complete picture of a company's overall performance or potential for future growth. It's always advisable to use a combination of financial metrics and qualitative factors when making investment decisions.
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Do you need to weigh up several investment projects or public companies to invest in? This spreadsheet compares the efficiency of capital use between companies based on assumptions of Return on Invested Capital (ROIC), reinvestment rate and valuation multiples. Then, net income and equity value forecasts are derived and returns are compared over the long term by the company. The sensitivity of returns to the core assumptions is also provided.
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Need help with which companies or projects to invest in? As a key driver of value in business, ROIC measures how well the company deploys its capital....
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