Letters by Topic
Letters on Return on Invested Capital
The profitability a business earns on the capital invested in it — the core driver of long-term value.
1979·Returns on capital, not EPS growth, as the test of management (1979 letter)
The primary test of managerial economic performance is the achievement of a high earnings rate on equity capital employed (without undue leverage, accounting gimmickry, etc.) and not the achievement of consistent gains in earnings per share.
1977·ROE as the right yardstick versus EPS (1977 letter)
We believe a more appropriate measure of managerial economic performance to be return on equity capital.
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Return on Invested Capital is one of the ideas behind the ValueOS tools. See it applied to real companies.