Reinvestment rate
The share of after-tax operating profit a company puts back into the business as net new investment.
Growth in operating profit is roughly the reinvestment rate multiplied by the return on incremental capital. A company that earns high returns on new investment can grow quickly while still producing free cash flow.
Learn more in these lessons
- Returns on incremental capitalWhen does a company's growth create value for shareholders?
Related terms
Spotted a mistake or something unclear? Report it by email. Here is how corrections work.