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We’d all like to invest like the legendary Warren Buffett, turning thousands into millions or more. Buffett analyzes companies by calculating return on invested capital in order to help determine whether a company has an economic moat — the ability to earn returns on its money above that money’s cost.

ROIC is perhaps the most important metric in value investing. By determining a company’s ROIC, you can see how well it’s using the cash you entrust to it and whether it’s actually creating value for you. Simply, it divides a company’s operating profit by how much investment it took to get that profit. The formula is

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