ROIC = NOPLAT / (Invested Capital)
FCF = NOPLAT + Noncash operating expenses - Investments in invested capital.
Invested Capital (for a simplistic firm)
= Operating Assets - Operating Liabilities = Debt + Equity
Total Funds Invested (for a more realistic firm)
= Invested Capital + Nonoperating Assets
= (Operating Assets - Operating Liabilities) + Nonoperating Assets
= (Debt + Equity) + Nonoperating Assets
= (Debt and Debt Equivalents) + (Equity and Equity Equivalents)
(NOPLAT is.Net operating profit less adjusted taxes)
In practice, there are difficulties in categorizing assets as operating or nonoperating and right-hand balance sheet items as debt or equity, and this makes computing the values in these equations difficult.
- operating leases,
- pensions and other retirement benefits,
- capitalized research and development, and
- nonoperating charges and restructuring reserves.
- ongoing operating provisions,
- long-term operating provisions,
- nonoperating provisions, and,
- income-smoothing provisions.