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.
Next Up
BREAKING DOWN '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

Weighted Average Cost Of Capital ...
Weighted average cost of capital (WACC) is a calculation of a ... 
Economic Capital
The amount of capital that a firm, usually in financial services, ... 
Cost Of Capital
The required return necessary to make a capital budgeting project, ... 
Invested Capital
The total amount of money that was endowed into a company by ... 
Return On Capital Gains
The return that one gets from an increase in the value of a capital ... 
Capital Expenditure (CAPEX)
Capital expenditure, or CapEx, are funds used by a company to ...
Related Articles

Fundamental Analysis
DCF Analysis: Calculating The Discount Rate
By Ben McClure Contact Ben Having projected the company's free cash flow for the next five years, we want to figure out what these cash flows are worth today. That means coming up with an appropriate ... 
Fundamental Analysis
Explaining Capital Employed
Generally, capital employed refers to all of the assets used in a business that contribute to the company’s ability to earn revenue. 
Forex Education
How to Calculate Required Rate of Return
The required rate of return is used by investors and corporations to evaluate investments. Find out how to calculate it. 
Economics
Understanding Capital Investment
Capital investment is a term that describes a company’s expenditures for longterm assets used in the operation of its business. 
Term
What's a Return of Capital?
A return of capital is an investment return that is not considered income. 
Options & Futures
Find Quality Investments With ROIC
Return on invested capital is a great way to measure the true value produced by a company. Learn to use the ROIC metric and increase your chances of finding successful investments. 
Personal Finance
Target Corp: WACC Analysis (TGT)
Learn about the importance of capital structure when making investment decisions, and how Target's capital structure compares against the rest of the industry. 
Economics
Calculating Days Working Capital
A company’s days working capital ratio shows how many days it takes to convert working capital into revenue. 
Professionals
Top Things To Know For An Investment Banking Interview
Without some basic knowledge, you won't get the job. Find out what you need to know and how to prepare. 
Stock Analysis
Home Depot's 6 Key Financial Ratios (HD)
Learn about important financial ratios used to determine the performance of retailer Home Depot; these give a quick snapshot of the company's profitability.
RELATED FAQS

What does a high weighted average cost of capital (WACC) signify?
Find out what it means for a company to have a relatively high weighted average cost of capital, or WACC, and why this is ... Read Answer >> 
How do interest rates affect the weighted average cost of capital (WACC) calculation?
The interest rate is one of many external factors that can change the inputs in the weighted average cost of capital (WACC) ... Read Answer >> 
What is the formula for calculating weighted average cost of capital (WACC)?
Weighted average cost of capital (WACC) is the average aftertax cost of a company’s various capital sources, including ... Read Answer >> 
What is the formula for calculating weighted average cost of capital (WACC) in Excel?
Learn about the weighted average cost of capital (WACC) formula and how it is used to estimate the average cost of raising ... Read Answer >> 
How do you calculate the proper weights of different costs of capital?
Understand how to calculate the weights of the difference costs of capital and how this calculation is used to determine ... Read Answer >> 
How does a company choose between debt and equity in its capital structure?
Learn about the benefits and drawbacks of debt and equity financing and how companies compare different capital structures ... Read Answer >>