Hi all - Looking for some help thinking through these two metrics in an intuitive way. I had an MD who insisted on using ROGI to evaluate a client business (capital intensive, mature industry, perhaps a collection of older PP&E assets) rather than ROIC. I understand ROIC is much more popular/common to evaluate the efficiency of capital put in the business but wondering if anyone has a framework to think about the two and when to use one vs. the other? What would ROGI tell you vs. ROIC? What are the benefits or key things to remember when using one or the other?
My hunch is - in capital intensive industries, you may want to use ROGI to account for different depreciation schedules and artificially inflated ROIC numbers due to depreciation (or perhaps when capex hasn't historically kept up with D&A)? Thus it would give a better picture of reinvestment economics?
Is this correct? How else should I think about this?
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