Return On New Invested Capital - RONIC

AAA

DEFINITION of 'Return On New Invested Capital - RONIC'

A calculation used, either by a firm or investors, to determine the amount of return that a firm could earn on additional contributed capital. The calculation measures the return generated when a company converts its capital into capital expenditures, which generate revenues from core operations. A higher RONIC equates to a relatively efficient firm.

INVESTOPEDIA EXPLAINS 'Return On New Invested Capital - RONIC'

Return on new invested capital is very useful when compared to the weighted average cost of capital (WACC) of the same firm. WACC summarizes the cost of funds acquired through equity or debt issuance. If a company's RONIC, and/or return on invested capital (ROIC) is higher than the WACC, the company should move forward with the capital project because it will add value.

RELATED TERMS
  1. Cost Of Capital

    The required return necessary to make a capital budgeting project, ...
  2. Weighted Average Cost Of Capital ...

    A calculation of a firm's cost of capital in which each category ...
  3. Economic Value Added - EVA

    A measure of a company's financial performance based on the residual ...
  4. Market Value Added - MVA

    A calculation that shows the difference between the market value ...
  5. Shareholder Value Added - SVA

    A value-based performance measure of a company's worth to shareholders. ...
  6. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating ...
Related Articles
  1. Options & Futures

    Find Quality Investments With ROIC

  2. Markets

    Understanding Economic Value Added

  3. Investing Basics

    What's more important, cash flow or ...

  4. Investing Basics

    What's more important, cash flow or ...

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center