Cash Return on Gross Assets Ratio

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

Alternative names of Cash Return on Gross Assets:

  • Gross CROGA
  • Cash Return on Gross Assets

What Does Cash Return on Gross Assets Show?

Gross assets are taken into account to study the indicator. These are assets that are valued at the cost of purchasing fixed assets. At the same time, the average annual cost is considered.

Formula for the calculation of gross assets is as follows: initial cost of the fixed assets + working capital.

In general, the indicator shows the company’s performance in accordance with the owners’ expectations. Operating cash flow after taxes is used to calculate CROGA.

Formula of Cash Return on Gross Assets

CROGA = Operating Cash Flow – Income Tax / Average Value of Gross Assets

Normative Value of Cash Return on Gross Assets

The value of the CROGA indicator is compared to the rate of capital expenditure, i.e. the weighted average cost of capital (WACC). If the return on gross assets is higher than the weighted average cost of capital, the efficiency of the company is high and shareholders will receive profits.