Cash Flow Return On Investment - CFROI

The cash flow return on investment (think: cash flow ROI, or CFROI) can give you an idea of a company’s average economic return in a year.

By looking at the cash flow return on investment and comparing it to the cost of capital, investors can get a sense of how valuable a company might be to invest in.

Is the company using its capital to make returns that are proportionally high compared to other companies? CFROI makes it easy to compare cash creation capabilities of one company to another (say that five times fast).