Pay attention to a company's return on invested capital from "summary" of The Little Book That Builds Wealth by Pat Dorsey
Return on invested capital is a crucial metric to consider when evaluating a company's potential for creating wealth for its shareholders. This metric essentially measures how efficiently a company is able to use its capital to generate profits. By focusing on this key indicator, investors can gain valuable insights into a company's ability to generate sustainable returns over the long term.
Calculating return on invested capital involves dividing a company's operating income by its total invested capital. This provides investors with a clear picture of how well a company is utilizing its resources to generate profits. A high return on invested capital indicates that a company is able to generate significant returns on the capital it has invested, which is a positive sign for investors...
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