I was reading on ROIC, but I see many methods of calculating it, I was wondering which one do you guys use?
I am thinking of EBIT divided by Equity+Long Term Debt-Cash.
Sorry for the late reply as I just got back from an overseas trip. We usually use the EBIT by Total Capital as you mentioned.
The total capital is the sum of the debt and equity.
You are right there are many formula to the ROIC it depend on which one you want to use. We use the EBIT because it is the operating profit of the company. The taxation can varies in percentage for the company so the purest form should be EBIT.
We did not take the excess cash out.
My personal opinion is to focus more on the business and management segment, as much as I want to focus on financial numbers but still it is the business and management that create out the numbers. In my earlier investing journey, I am a number person and it caused me to miss out a lot of good companies that eventually did very well. I try to keep financial ratio as simple as possible.
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