Cash Return On Capital Invested - CROCI

Deutsche Bank is known for devising a number of arcane financial ratios to determine financial performance. “Cash return on cash invested,” or “Cash return on capital invested,” is a way to examine the profitability of a firm, and to determine how much money is required to generate gains. This is an explicit examination of cash flow.

The formula is pretty simple: Divide EBITDA by the total value of a company’s equity (both common and preferred) and other forms of capital. The higher the ratio of cash returned from investments, the better a company is performing.