Can someone explain how is this ratio calculated?
An what does it means? (like higher better, lower worse)
It is the return generated on all invested capital (book equity and debt). To calculate this ratio you need to tax effect the operating earnings of the business (NOPAT).
Higher is better for ROIC.
ROIC or ROC = (NOPLAT/InvestedCapital)
NOPLAT = NetOperatingProfitLessAdjustedTaxes = EBITA - Adjusted Taxes
Adjusted Taxes = Cash Taxes (not Accounting Taxes) on EBITA
InvestedCapital = Debt + Equity - Excess Cash