Why ROIC is Stupid

Erik Kobayashi-Solomon

May 10, 2016

As I was researching Union Pacific (see our UNP articles and reports in the IOI Dashboard), I was struck by the company managers' defense for hiking fees to shippers by 200% – 300% in some cases. UNP, like other railroads, measures capital efficiency by Returns on Invested Capital (ROIC), and managers claimed that under legacy contracts, the firm's ROIC …

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