Return on Capital

Return on Capital actually indicates how effective a company is at turning capital into profits. It is also called return on invested capital. It is a ratio used in finance, valuation and accounting, as a measure of the profitability and value-creating potential of companies after taking into account the amount of initial capital invested. Return on capital is most useful when it using to calculate the returns generated exclusively by the business operation itself, not the short-lived results from one-time events.