The extent to which ROIC exceeds WACC provides an extremely powerful tool for choosing investments. The P/E ratio, on the other hand, does not tell investors whether the company is producing value ...

This is also known as the weighted average cost of capital or WACC. The ratio between debt and equity should be the same as the ratio between a company's total debt financing and its total equity ...

Apple’s ROIC is massive and twice as high as Microsoft’s return ratio. Investors are more than willing to pay up for a company that – exaggerations aside – “creates value out of thin air”.

The extent to which ROIC exceeds WACC provides an extremely powerful tool for choosing investments. The P/E ratio, on the other hand, does not tell investors whether the company is producing value ...