Cash Flow Return on Assets Ratio

Cash Flow Return on Assets allows to assess the effectiveness of the enterprise’s formation of assets by means of money generated from the operating activity.

Alternative names of Cash Flow Return on Assets:

  • Cash Return on Assets
  • Coefficient of Return On Assets
  • Cash Flow Return on Assets

What Does Cash Flow Return on Assets Show?

The profitability of assets allows to assess the effectiveness of the balance value of the enterprise’s assets. The indicator is also analyzed to determine the amount of money generated from the operating activity for one dollar of the average annual value of assets. The operating cash flow may also be adjusted for the amount of interest on loans and dividends and income tax.

Formula of Cash Flow Return on Assets

CROA = Operating Cash Flow / Average Asset Value

CROA = Operating cash flow + Interest on loans and dividends + Income tax / Average assets

Normative Value of Cash Flow Return on Assets

There is no normative value of Cash Flow Return on Assets. The indicator is studied in its dynamics or in comparison with the average industry value. The financial policy should aim at increasing the indicator’s value, thus improving the efficiency of asset utilization.