ROIC, (1+Gni)/(1+Gic) ≥ 1 and ROIIC

Subject : ROIC, (1+Gni)/(1+Gic) ≥ 1 and ROIIC

By : ATC

.

(1)

ROIC alone is not adequate.

ROIIC alone is not adequate.

ROIC + ROIIC together are not adequate.

.

(2)

Solution;

ROIC + (1+Gni)/(1+Gic)≥1 : ✅

or

ROIC + (1+Gni)/(1+Gic)≥1 + ROIIC : ✅

.

Because:

.

(1)

When (1+Gni)/(1+Gic) = 1 :

Then,

(1 + ∆NI/NI_ttm) /(1 + ∆IC/IC_ttm) = 1

(NI_ttm + ∆NI)/(NI_ttm + ROIC_ttm × ∆IC) = 1

NI_ttm + ∆NI = NI_ttm + ROIC_ttm × ∆IC

∆NI = ROIC_ttm × ∆IC

∆NI/∆IC = ROIC_ttm

ROIIC_ttm = ROIC_ttm

.

(2)

When (1+Gni)/(1+Gic) < 1 :

Then,

ROIIC_ttm < ROIC_ttm

.

(3)

When (1+Gni)/(1+Gic) > 1 :

Then,

ROIIC_ttm > ROIC_ttm

.

(4)

(1+Gni)/(1+Gic) is more versatile than ROIIC.

If ∆IC ➡️ 0 or ∆IC = negative, ROIIC collapses.