Financial Ratio Analysis: Is ROIC Equal with ROA?

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Charlie Munger has one single – simple, financial ratio for stock market analysis “It’s obvious that if a company generates high returns on capital (ROIC) and reinvests at high returns, it will do well. But this wouldn’t sell books..”. In this article we will discuss:

  1. How ROIC is equal with ROA (Return On Asset)
  2. Why not use ROE (Return on Equity) instead?
  3. In what case ROIC failed?
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