Return On Research Capital - RORC

AAA

DEFINITION of 'Return On Research Capital - RORC'

A calculation used to assess the revenue a company brings in as a result of expenditures made on research and development activities. Return on research capital (RORC) is a component of productivity and growth, since research and development (R&D) is one of the ways in which companies develop new products and services for sale. This metric is commonly used in industries that rely heavily on R&D such as the pharmaceutical industry.

INVESTOPEDIA EXPLAINS 'Return On Research Capital - RORC'

Companies face an opportunity cost when examining the use of their funds. They can spend money on tangible assets, real estate or capital improvements, or they can invest in R&D. Investments made in research may take a number of years before tangible results are seen, and the return typically varies between industries and even within sectors of a particular industry.

RELATED TERMS
  1. Research And Development (R&D) ...

    Any expenses associated with the research and development of ...
  2. Research And Development - R&D

    Investigative activities that a business chooses to conduct with ...
  3. Development Stage

    A company that is in a preliminary or early state of its corporate ...
  4. Proprietary Technology

    A process, tool, system or similar item that is the property ...
  5. Price-To-Innovation-Adjusted Earnings

    A variation of the price-to-earnings ratio (P/E ratio) that takes ...
  6. Patent

    A government license that gives the holder exclusive rights to ...
RELATED FAQS
  1. What are some of the benefits of positive brand equity?

    Positive brand equity enables a firm to make a higher margin on sales and reduce advertising and marketing costs. Brand equity ... Read Full Answer >>
  2. How does a contra-asset account differ from a contra-liability account?

    A contra-asset account is an asset account with a credit balance and reduces the total assets on a company's balance sheet, ... Read Full Answer >>
  3. Why is an increase in capital stock on a company's balance sheet a bad sign for stockholders?

    An increase in the total of capital stock showing on a company's balance sheet is bad for investors, because it represents ... Read Full Answer >>
  4. How are Net Credit Purchases calculated in the accounts payable turnover ratio?

    The accounts payable turnover ratio treats net credit purchases as equal to cost of goods sold (COGS) plus ending inventory, ... Read Full Answer >>
  5. How do companies report the value of their capital stock?

    A company's capital stock shows up in the shareholders' equity portion of the balance sheet. There are two general methods ... Read Full Answer >>
  6. Is it wise for a company to have heavy cash flow investing activities outside of ...

    It is only wise for a company to have heavy cash flow from investing activities outside of capital expenditures if that company ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Patents Are Assets, So Learn How To Value Them

    Innovation is the key to staying on top. Find out how companies protect their ideas and how to figure out how much they're worth.
  2. Fundamental Analysis

    Evaluating Pharmaceutical Companies

    Learn how to find a healthy pharmaceutical investment in a market full of weak drugs.
  3. Markets

    Buying Into Corporate Research & Development (R&D)

    Investors take note: companies that cut research and development are in danger of saving today but losing big tomorrow.
  4. Fundamental Analysis

    The History Of Information Machines

    Discover how technology changed the way we exchange information when trading.
  5. Investing

    What Makes Apple Inc. So Valuable?

    Apple is the most valuable company in the world by a landslide. How did it get there and will it stay on top?
  6. Investing Basics

    What is a Minority Interest?

    A minority interest is an ownership or equity interest of less than 50% of an enterprise.
  7. Investing

    Free Cash Flow vs EBITDA: Which Should You Analyze?

    FCF and EBITDA are two ways of looking at the earnings of a business. EBITDA might be better for comparison purposes, while FCF is good for valuation.
  8. Investing

    Key Financial Ratios For The Retail Industry

    The retail industry is measured on sales growth in existing store, forecasted based on foot traffic and ticket data, and the impact on profitability ratios.
  9. Investing

    The Netflix P/E Ratio: What You Need To Know

    We show you how to compute and analyze the P/E ratio for Netflix.
  10. Trading Strategies

    Trading Risks And Rewards In Your Favor

    Measure reward and risk targets before taking a trade, and let those numbers guide your open position.

You May Also Like

Hot Definitions
  1. Standard Error

    The standard deviation of the sampling distribution of a statistic. Standard error is a statistical term that measures the ...
  2. Capital Stock

    The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents ...
  3. Unearned Revenue

    When an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can ...
  4. Trailing Twelve Months - TTM

    The timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation ...
  5. Subordinated Debt

    A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known ...
  6. International Financial Reporting Standards - IFRS

    A set of international accounting standards stating how particular types of transactions and other events should be reported ...
Trading Center