Define: Cash Return On Capital Invested

UK Accounting Glossary

Definition: Cash Return On Capital Invested



Advertisement



Full Definition of Cash Return On Capital Invested


CROCI, or Cash Return on Capital Invested, compares the cash generated by a company to its equity. This metric is cashflow based as opposed to earnings-based. Cash flow is generally considered more important than earnings as earnings can be manipulated via accounting policies. Cash Return on Capital Invested is also known as Cash Return on Cash Invested.

Cash Return on Capital Invested is calculated by dividing the earnings before interest, taxes, depreciation and amortization by the total capital invested.

The capital invested is defined as the equity capital and preferred shares. Long term loans are also included in the capital employed.

Cash Return on Capital Invested was developed by the Deutsche Bank Group and it is based on an economic profit model. There are no specific rules regarding its usage but the higher this measure is the better it is. A company with a higher cash return on capital invested is a good investment opportunity.

Investors should not base their decision solely on this parameter. Cash Return on Capital Invested should be used with other financial ratios to better assess the performance of a company.  It should be compared with the historical data and data from other companies to see whether the performance of a company is improving or deteriorating over time.


Advertisement



Synonyms For Cash Return On Capital Invested


CROCI


Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/cash-return-on-capital-invested/
Modern Language Association (MLA):
Cash Return On Capital Invested. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. March 28, 2020 https://payrollheaven.com/define/cash-return-on-capital-invested/.
Chicago Manual of Style (CMS):
Cash Return On Capital Invested. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/cash-return-on-capital-invested/ (accessed: March 28, 2020).
American Psychological Association (APA):
Cash Return On Capital Invested. PayrollHeaven.com. Retrieved March 28, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/cash-return-on-capital-invested/

Definition Sources


Definitions for Cash Return On Capital Invested are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd March 2020.