§ Returns on capital
Reinvestment rate
Glossary version 2026-07-12.v1 · reviewed July 12, 2026
The share of operating profit or cash flow reinvested in the business to support future growth. Growth creates value only when the return on that reinvestment exceeds the cost of capital.
The reinvestment rate measures how much of after-tax operating profit is retained and invested rather than distributed. Together with the return on invested capital, it links business economics to sustainable growth. High reinvestment is attractive when incremental returns exceed WACC and destructive when the company repeatedly invests below its cost of capital.