ROIC

What it is\nROIC measures how efficiently a company turns its invested capital (debt + equity) into operating profit. A 25% ROIC means each dollar of capital throws off 25 cents of profit a year.\n\n## Why it matters\nBuffett: "The single most important number for evaluating a business." High, sustained ROIC is the best evidence of a wide moat — competitors would copy a 30% ROIC business if they could; the fact that they can't (or haven't) means something structural is protecting it.\n\n## What "good" looks like\n- Excellent: 20%+ sustained over 5+ years (Apple, Visa, Costco)\n- Good: 12–20% (most quality businesses)\n- Fair: 5–12%\n- Poor: < 5% — capital is being destroyed in real terms after the cost of capital\n\n## Pitfalls\n- Asset-light businesses (software, consumer brands) naturally show higher ROIC than capital-heavy ones (utilities, telecoms). Compare within sectors.\n- One year of high ROIC is noise. Buffett looks for 5–10 years of consistency.\n- Goodwill from acquisitions inflates "Invested Capital" — businesses that grew via M&A may show artificially low ROIC.