If Smith Pharmaceuticals Has a 15% Return on Invested Capital

question 33

Multiple Choice

If Smith Pharmaceuticals has a 15% return on invested capital (RoIC) ,what do you need to know to determine if it has a competitive advantage?

• A) It must be compared to the RoIC of the competitors and industry.
• B) Nothing, 15% is a terrific return for the shareholders.
• C) It must be evaluated for depreciation of the capital.
• D) It must be compared to the history of the firm's RoIC over a number of years.

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Definitions:

Net Present Value

A calculation used to determine the value of a future stream of income or expenses discounted back to the present value.