return on capital

USAGE SUMMARY

"return on capital" is a correct and usable phrase in written English.
It is an economic term which refers to the income that a business makes in comparison to what is invested in the business. For example: "The company's return on capital was impressive, indicating that the business was making a good profit."

✓ Grammatically correct

News & Media

Formal & Business

Science

Human-verified examples from authoritative sources

Exact Expressions

56 human-written examples

Of course, investing is about maximizing one's return on capital.

Huffington Post

If China were massively overinvesting, one would expect the return on capital to be falling.

The Economist

Still, Amdocs has one of the best records of return on capital among the tech leaders.

Forbes

Return on capital is the second test.

The Economist

But others will see their apparent return on capital plunge.

The Economist

The industry's return on capital has been chronically anaemic.

The Economist

"It just matters whether the return on capital is higher".

The New York Times

Human-verified similar examples from authoritative sources

Similar Expressions

4 human-written examples

It's a high-return-on-capital, cash-generating business model.

Forbes

Jaffr has linked compensation for key executives directly to return-on-capital targets.

Forbes

But Jaffr has linked compensation of key executives directly to his ambitious return-on-capital targets.

Forbes

“You’ve seen revenue accelerating, margins improving, improving return-on-capital metrics.

Forbes

Expert writing Tips

Best practice

When discussing financial performance, clearly define which capital base you are referring to (e.g. invested capital, employed capital) to avoid ambiguity in the "return on capital" calculation.

Common error

Avoid using "return on capital" and return on equity interchangeably. "Return on capital" considers both debt and equity, while return on equity focuses solely on shareholders' investments. Use the appropriate metric depending on whether you're assessing overall asset efficiency or shareholder returns.

Linguistic Context

The phrase "return on capital" functions as a noun phrase that identifies a financial metric. It is commonly used in business and economic contexts to denote the profitability of a company's capital investments. As Ludwig AI states, it's an economic term.

Expression frequency: Very common

Frequent in

News & Media

50%

Formal & Business

30%

Science

20%

Less common in

Academia

0%

Encyclopedias

0%

Wiki

0%

Ludwig's WRAP-UP

In summary, "return on capital" is a frequently used noun phrase that denotes a key financial performance metric, indicating how efficiently a company uses its capital to generate profits. As Ludwig AI highlights, it's an economic term commonly found in business, finance, and economic contexts. The analysis shows it is generally grammatically correct and is predominantly used in news, business, and to a lesser extent, scientific contexts. To ensure clarity, it's essential to specify which capital base is being referenced and differentiate it from similar metrics like "return on equity".

More alternative expressions

Phrases that express similar concepts, ordered by semantic similarity:

return on investment

Broader term that encompasses various types of investments, not just capital.

rate of return on capital

More explicit about the calculation of return as a rate or percentage.

return on equity

Focuses specifically on the return to shareholders' equity.

earnings on capital

Specifically refers to the earnings generated from the capital invested.

profitability of capital

Highlights the profit-generating capability of the capital employed.

capital efficiency

Highlights how effectively capital is used to generate revenue.

return on assets

Considers all assets, not just capital, in the return calculation.

investment profitability

Emphasizes the profit-generating ability of investments.

capital productivity

Focuses on the output generated per unit of capital invested.

yield on capital

Implies the income generated as a percentage of the capital invested.

FAQs

How do you calculate "return on capital"?

The calculation for "return on capital" typically involves dividing a company's earnings (such as net operating profit after tax) by its total capital (debt plus equity). The specific formula can vary, so clarify which version is used for consistent comparison.

What's the difference between "return on capital" and "return on investment"?

"Return on capital" focuses on the returns generated from the company's capital structure (debt and equity), whereas "return on investment" is a broader metric that can apply to any type of investment, including projects, assets, or entire business units.

Why is "return on capital" important for investors?

"Return on capital" helps investors evaluate how effectively a company is using its capital to generate profits. A higher "return on capital" indicates better capital management and greater profitability, which can attract investors.

What is considered a good "return on capital"?

A good "return on capital" varies by industry, but generally, a rate higher than the company's cost of capital is desirable. Comparing a company's "return on capital" to its competitors and industry averages provides a useful benchmark.