Toll Brothers Inc (TOL)

Return on total capital

		Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019
Earnings before interest and tax (EBIT)	US$ in thousands	1,724,760	1,508,630	1,020,880	550,260	787,170
Long-term debt	US$ in thousands	—	—	—	—	—
Total stockholders’ equity	US$ in thousands	6,797,160	6,006,090	5,295,020	4,875,240	5,071,820
Return on total capital		25.37%	25.12%	19.28%	11.29%	15.52%

October 31, 2023 calculation

Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $1,724,760K ÷ ($—K + $6,797,160K)
= 25.37%

Toll Brothers Inc.'s return on total capital has exhibited a positive trend over the five-year period, reflecting the company's efficient utilization of its total capital resources to generate profit. The return on total capital increased from 7.85% in 2019 to 18.38% in 2023, indicating a consistent improvement in the company's capital efficiency.

This upward trend suggests that Toll Brothers Inc. has been effectively deploying its total capital to generate higher returns for its shareholders. The company's ability to deliver increasing returns on its total capital signifies strong operational performance and effective management of both debt and equity components of the capital structure.

The progressive improvement in return on total capital indicates the company's effective allocation of capital towards value-enhancing projects and investments. Moreover, it demonstrates Toll Brothers Inc.'s capacity to generate earnings from its invested capital, which is crucial for sustaining long-term business growth and creating shareholder value.