Industry & Company Analysis

Question 1

ROIC

Answer 1

=net operating profit adjusted for taxes (NOPLAT) / invested capital (operating assets - operating liabilities)
Return to both debt and equity; preferable to ROE sometimes bc allows comparison across firms with different capital structures.
Firms with higher ROIC are likely exploiting some competitive advantage in the production and/or sale of their products.

Question 2

Return on capital employed

Answer 2

Similar to ROIC but uses pretax operating earnings in the numerator to facilitate comparison between companies that face different tax rates

Question 3

Gross interest expense

Answer 3

Depends on Amount of debt outstanding (gross debt) and interest rates

Question 4

Net debt

Answer 4

Gross debt minus cash, cash equivalents, and short-term securities

Question 5

Net interest expense

Answer 5

Gross interest expense minus interest income on cash and short-term debt securities owned