Dr. Paul Borosky, DBA, MBA
Business Consultant & Author
Guide 30 of 34 · Financial Ratios
ROIC vs. ROCE (Apple Example)
Two capital returns. One before tax, one after.
Return on equity can be bent by buybacks. ROCE and ROIC look past that and ask what the long-term money in the business actually earns. Analysts love them for that reason. Apple scores near 70% on one and 65% on the other, numbers very few companies on earth can match.
Last Updated: 10/27/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Is the Difference Between ROIC and ROCE?
Textbook Definition
Return on capital employed (ROCE) divides EBIT by capital employed, which is total assets minus current liabilities. Return on invested capital (ROIC) divides net operating profit after taxes (NOPAT) by invested capital, which is total debt plus total equity.
In Plain English
ROCE asks what the long-term money tied up in the business earns, before tax. ROIC asks what every dollar lenders and owners put in earns, after tax. Both strip out the short-term noise that can twist other ratios.
ROCE
EBIT ÷ (Total Assets − Current Liabilities)
Apple, fiscal 2025: 68.7%
ROIC
NOPAT ÷ (Total Debt + Total Equity)
Apple, fiscal 2025: 65.1%
NOPAT means EBIT times (1 − tax rate). It keeps the tax bill but ignores how the company is financed. Both ratios start from operating income, also called EBIT, so both ignore how the company is financed. That is the point: they measure the business, not the balance sheet strategy.
One Real Company
Apple’s ROCE and ROIC, 2021 to 2025
Operating profit rose from $108.9 billion to $133.1 billion. The capital behind it fell. Both returns climbed about 15 to 20 points.
| Line | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| EBIT | 133,050 | 123,216 | 114,301 | 119,437 | 108,949 |
| Capital employed | 193,610 | 188,588 | 207,275 | 198,773 | 225,521 |
| ROCE | 68.7% | 65.3% | 55.1% | 60.1% | 48.3% |
| NOPAT | 112,281 | 93,531 | 97,477 | 100,088 | 94,459 |
| Invested capital (debt + equity) | 172,390 | 163,579 | 173,234 | 170,740 | 187,828 |
| ROIC | 65.1% | 57.2% | 56.3% | 58.6% | 50.3% |
Source: Apple Form 10-K filings, fiscal 2021 to 2025, as analyzed in the book. $ millions.
The Method
How to Calculate ROCE and ROIC in 5 Steps
Find EBIT.
Operating income from the income statement. Apple: $133.1 billion in fiscal 2025.
Build capital employed for ROCE.
Total assets minus current liabilities. Apple: $359.2 billion minus $165.6 billion.
Build NOPAT for ROIC.
EBIT times one minus the effective tax rate. Apple’s 15.6% rate leaves about $112.3 billion.
Build invested capital.
Total debt plus total equity. Apple: $98.7 billion of debt plus $73.7 billion of equity.
Divide and compare.
Divide each profit by its capital. Then compare to the cost of capital and to rivals.
Why These Beat ROE for Apple
Apple’s ROE of 152% is inflated by a tiny equity base. ROCE and ROIC still benefit a little from buybacks, but far less, because they count debt and long-term liabilities too. That is why the book gives Apple an A on both while giving ROE a C+. See the full comparison in ROA vs. ROE.
Compare It
Apple vs. Microsoft: Lean Capital vs. Heavy Building
| Latest fiscal year | Apple | Microsoft |
|---|---|---|
| ROCE | about 69% | about 27% |
| ROIC | 50 to 65% | high 20s |
| Basic earning power | about 37% | about 21% |
Microsoft’s fiscal year ends in June, Apple’s in September.
Microsoft’s returns are strong by any normal standard. They look smaller next to Apple because Microsoft is spreading its profit over a much larger base of data centers and equipment, while Apple stays asset-light and keeps shrinking its equity.
Pick the Right One
When Should You Use ROCE and When Should You Use ROIC?
- Use ROCE to compare companies with very different tax situations. It is pre-tax, so taxes do not muddy the comparison.
- Use ROIC to judge value creation. Compare it to the company’s cost of capital, the blended rate it pays lenders and owners.
- Use both when ROE looks too good. If ROE is sky-high but ROCE and ROIC are ordinary, leverage or buybacks are doing the work.
- Watch the denominators. ROCE subtracts current liabilities. ROIC adds debt and equity. They will rarely match exactly.
Any ROIC above the mid-teens is generally considered excellent. Apple’s has run from about 50% to 65%. That puts it in very rare company. The trend matters as much as the level: Apple’s ROIC rose from about 50% in 2021 to 65% in 2025, which says management is putting each invested dollar to better use every year, not just riding one good season.
Beginner Traps
What Do Beginners Get Wrong About ROIC and ROCE?
- Using the statutory tax rate instead of the effective rate for NOPAT.
- Mixing up capital employed and invested capital.
- Calling a high ROIC good without comparing it to the cost of capital.
- Forgetting buybacks can still lift both ratios a little.
- Comparing ROCE across firms with very different current liabilities.
- Using one year when a one-time tax charge distorts NOPAT.
How the Book Grades Apple’s Capital Returns
From the Book
What 69% Really Means
Profitability Ratios · Return on Capital Employed
Seventy Cents a Dollar
A ROCE approaching 70 percent means Apple earns nearly 70 cents of operating profit on every dollar of long-term capital in the business.
ROCE, ROIC, basic earning power, and the full profitability chapter, all on Apple. It is in the book.
Get the Book on Amazon →Owner’s Corner
Every equipment purchase or new location is invested capital. If it does not earn more than your loan costs, it is not worth it. Start with how to calculate ROI, then compare the answer to your loan rate. Need a lender-ready plan for the investment? See business plan writing services.
Beyond the Book
From Reading Statements to Building a Business
Same skills, real stakes. Pick the level of help that fits where you are.
Business Plan Templates
Fill in the blanks. Plan, projections, and statements set up for your type of business.
See the Templates →Business Plan Writing
Bank-ready plans with real projections, written by Dr. Paul.
See Plan Writing →Business Consulting
Turn your financial statements into a growth plan with Dr. Paul.
See Consulting Options →FAQ
ROIC and ROCE Questions
What is the difference between ROIC and ROCE?
What is NOPAT?
What is a good ROIC?
Written by Dr. Paul Borosky, DBA, MBA, business consultant, author, and adjunct finance instructor with an MBA focused in finance.
This page is for general educational purposes only. It is not investment, financial, tax, accounting, or legal advice, and nothing here is a recommendation to buy or sell any security. Apple and Microsoft figures come from their public filings as analyzed in the book. Apple and Microsoft are trademarks of their respective owners, and this page is not affiliated with or endorsed by either company.