Question

What is the expected return on invested capital (ROIC) under each operating plan?

Answer 1

“Return on invested capital is a profitability ratio. It measures the return that an investment generates for those who provide the capital.”

It measures the following:

1. Assesses the company’s efficiency at allocating the capital in its control to make profitable investments
2. It gives an idea of how well the resources are being used to maximize returns on investment.

“An operating plan is a plan made by a part of the organization that defines the actions it will take based on its strategic objective and upper management plans.”

The types of operating plans as follows:

• The strategic plan bases investment decision on predefined objectives and maximizing stakeholders returns.
• Tactical plan, or the actual means to achieve a target or an objective predefined.
• Operational plan-These are annual plans and are made to arrive on the day to day working and clearly identifying targets to meet the long-term strategy of the organization.