Risk-adjusted return on capital RAROC. is meant to give decision-makers the ability to compare the returns from different projects with varying risk levels.

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RAROC is a risk-adjusted profitability measurement framework for analyzing risk-adjusted financial performance and providing a consistent view of profitability across different risk levels. It allows decision-makers to compare the potential returns of projects, investments, or business segments by adjusting for the risk involved, thereby facilitating more informed and equitable financial decisions.

Risk-Adjusted Return on Capital RAROC