Financial Modeling

Re: ROIC

This is a great question and here we will take this opportunity to clarify for all ROC vs ROIC: ROC is Return on capital and meant to capture capital structure financial returns. It would be comparable to ROE and it IS supposed to include all stakeholders in the numerator as well: (Net Income... Read More

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by WST Expert 1.

added 8 years ago

Re: ROIC

Thank you for this clarification. What is the difference between (Net Income+Interest Expense) and NOPAT?

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by Brown U.

added 8 years ago

Re: ROIC

Big conceptual difference is that Net Income is to Equity shareholders only whereas NOPAT is to all financial stakeholders. Think back to importance of TEV and how everyone gets it wrong. Mathematical difference is that by starting with Net Income and then adding back Interest Expense, you are ge... Read More

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by WST Expert 1.

added 8 years ago

Re: ROIC

Thank you, I'm kind of confused at why NOPAT doesn't account for the tax shield provided by the interest expense? Why can you just do 100*(1-t) to calculate NOPAT?

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by Brown U.

added 8 years ago

Re: ROIC

NOPAT is not meant to account for the tax shield on interest expense because it is pre-capital structure.

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by WST Expert 1.

added 8 years ago

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