When it comes to measuring investment performance, several metrics are commonly used, each with its unique perspective. One such measure is the Multiple on Invested Capital, often referred to as MOIC.

What is Multiple on Invested Capital (MOIC)?

MOIC stands for Multiple on Invested Capital. It's a performance measure that investors use to evaluate the efficiency of an investment or to compare the efficiency of several different investments. MOIC measures the return as a multiple of the original investment.

How is MOIC Calculated?

The MOIC is calculated as follows:

MOIC = Total Value Received / Total Invested Capital

Let's say you invested $100,000 in a startup, and later on, you sold your stake for $500,000. The MOIC would be calculated as $500,000 (total value received) divided by $100,000 (total invested capital), resulting in an MOIC of 5.0x. This means you received five times the amount of your original investment.

Why is MOIC Important?

MOIC is a useful metric because it provides a quick and straightforward view of the profitability of an investment without considering the time it took to generate the return. It's particularly handy when comparing performance across different investments.

However, like any other financial metric, MOIC doesn’t tell the whole story. It does not take into account the time value of money or the duration of the investment. Therefore, while it's a valuable tool in your toolkit, it should be used alongside other measures like Internal Rate of Return (IRR) and Return on Investment (ROI) to get a complete picture of your investment performance.

At Vyzer, we're committed to providing you with the tools and information you need to manage and monitor your wealth effectively. Understanding these metrics is just one way Vyzer acts as your personal wealth director, guiding your financial journey with knowledge and insights.