EV to Invested Capital
Calculate the enterprise value to invested capital ratio, the market value of a company’s operations against the capital invested in them.
Koller, Goedhart and Wessels show that a company creates value when its return on invested capital exceeds its cost of capital, and EV to invested capital is how the market prices that: a ratio above 1 means the market expects the company to earn more than its cost of capital on the capital invested, a ratio below 1 that it expects less. Read together with the return on invested capital (get_return_on_invested_capital), a high ROIC with a low EV/IC points to value.
The formula is as follows:
\[\text{Invested Capital} = \text{Total Equity} + \text{Total Debt} - \text{Cash and Short Term Investments}\] \[\text{EV to Invested Capital} = \text{Enterprise Value} / \text{Invested Capital}\]The invested capital is measured from the financing side, with the same items as the enterprise value (get_enterprise_value): the equity includes minority interest and preferred stock, and the cash and short-term investments are deducted from both. It is a point in time at the end of each period, as the enterprise value is. An invested capital of zero or less gives NaN.
Also known as: EV/IC, enterprise value to invested capital, firm market-to-book.
EV to Invested Capital in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_ev_to_invested_capital_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["AAPL", "KO", "F"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_ev_to_invested_capital_ratio()
Or, after setting up the Finance Toolkit MCP, ask:
What was the enterprise value of Apple, Coca-Cola and Ford relative to their invested capital from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| AAPL | 22.4029 | 16.3546 | 24.9497 | 35.2982 | 31.4798 |
| F | 1.2546 | 1.0247 | 1.0422 | 0.97 | 1.0985 |
| KO | 5.1209 | 5.6096 | 5.0137 | 5.2427 | 4.9835 |
Parameters
get_ev_to_invested_capital_ratio accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
show_daily | bool | Whether to show daily values: the close of each trading day against the balance sheet of the latest period that has ended on or before that day (also when it ended before the start date), so no figures are used before their period closes. Defaults to False. | True |
diluted | bool | Whether to use diluted shares in the calculation. Defaults to True. | False |
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of period ends to average the balance sheet items over, as for the price to book ratio. Defaults to None, which uses the balance sheet at the end of each period. | 4 |