Cash Return On Invested Capital Ratio

Cash Return On Invested Capital shows the amount of free cash flow the enterprise can generate per single unit of the invested funds. Indicator is used to assess the investment attractiveness.

Alternative names of Cash Return On Invested Capital:

  • CROCI
  • Cash Return On Invested Capital

What Does Cash Return on Invested Capital Show?

Cash Return on Invested Capital or CROIC shows how much money the company can generate per unit of invested money. The indicator is similar to ROIC, but is based on the cash flow, not a profit.

Formula of Cash Return on Invested Capital

As a rule, the formula for determining Cash Return on Invested Capital is as follows:

CROIC = Free Cash Flow / Invested Capital

In this case, the invested capital is calculated in the following way:

Invested capital = Equity + Liabilities – Short-term liabilities

Normative Value of Cash Return on Invested Capital

A high value of the CROIC indicator is desirable for a company. The value that exceeds 10% is considered perfect.