THE PLAYGROUND
The return engine
Margin and capital efficiency work together.
LIVE EXPERIMENT
The return engine
Return on invested capital15%
Before you move a sliderCan a low-margin business earn a high return on capital?
ROIC 15% = NOPAT margin 7.5% × capital turnover 2×
READ THE MECHANISM
NOPAT is 75. The business generates 2 of revenue per unit of average invested capital. Improving margin and reducing unnecessary capital can raise ROIC, but cutting necessary investment may damage future returns.
Model assumptions & units
Hypothetical $m. NOPAT = operating profit × (1 − tax rate). ROIC definitions vary; this model assumes the stated average capital is consistently measured and excludes excess cash. It is not the same as shareholder return.