Return On Invested Capital (ROIC) measures what aspect of a company?

Return On Invested Capital (ROIC) is a financial metric that assesses how effectively a company uses its capital to generate profits. Specifically, it measures the return that a company provides to its shareholders and debt holders relative to the capital that has been invested in the company. This return is crucial since it reflects how well management is utilizing the resources at its disposal to generate earnings and create value.

ROIC is typically calculated by dividing net operating profit after tax (NOPAT) by total invested capital. A higher ROIC indicates that a company is more efficient at generating returns from its investments, which is favorable from an investor’s perspective. Investors use ROIC to determine whether a company is generating a sufficient return on the money invested in its operations and to compare the efficiency of capital use across different companies or industries.

The other options, while related to a company's financial performance, do not specifically measure the efficiency or effectiveness of capital utilization in generating returns for shareholders. Total revenue generated focuses solely on sales performance, the costs associated with investments pertain to expense management, and cash flow from operating activities emphasizes liquidity rather than return on capital employed. Therefore, the essence of ROIC aligns best with the concept of the returns provided to shareholders, validating the correct choice.