ROIC-WACC Spread
The gap between a business's return on invested capital (ROIC) and its weighted-average cost of capital (WACC). A positive spread means each dollar of invested capital earns more than the capital cost to raise -- the business creates economic value on every reinvested dollar. A negative spread means the business is destroying economic value on every reinvested dollar, and growth then amplifies the destruction. The spread is the diagnostic; ROIC by itself is just a level. A lifelong investor reads ROIC and WACC together so growth announcements get filtered through whether each new dollar will widen or narrow the spread.
Lessons that use this term
Related terms
Ambiguity Aversion · Anchored Assumption · Asset Beta · Bank ROE Spread · Banker Pitch Deck · Beta
Open this term in the app → — no account needed; browse the full glossary while you research.