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:
- How ROIC is equal with ROA (Return On Asset)
- Why not use ROE (Return on Equity) instead?
- In what case ROIC failed?