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Consilient Observer
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novembre 09, 2022

ROIC and Intangible Assets

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novembre 09, 2022

ROIC and Intangible Assets


Consilient Observer

ROIC and Intangible Assets

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novembre 09, 2022

 
 

A Look at How Adjustments for Intangibles Affect ROIC

  • We extend the analysis from our recent report, “Return on Invested Capital,” by adjusting ROIC for all companies to reflect intangible investment.
  • While the median and aggregate ROIC for the adjusted figures is similar to the traditional one, the adjusted figures have much less dispersion.
  • The main result is that extremely high and low ROICs regress toward the mean.
  • We believe these adjustments represent a step toward a more accurate view of the magnitude and return on investment.
 
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DEFINITIONS
Free cash flow (FCF) is a measure of financial performance calculated as operating cash flow minus capital expenditures. FCF represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base.

Return On Invested Capital (ROIC) represents the rate of return a company makes on the cash it invests in its business.

 

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