Cash Flow Return on Investment - CFROI

AAA

DEFINITION of 'Cash Flow Return on Investment - CFROI'

A valuation model that assumes the stock market sets prices based on cash flow, not on corporate performance and earnings.

Cash Flow Return on Investment (CFROI)

INVESTOPEDIA EXPLAINS 'Cash Flow Return on Investment - CFROI'

It's valuable to consider as many models as possible when looking at the stock market. Financial theory is similar to scientific theory; no model can be entirely proved or disproved, and a diversity of opinions is encouraged

RELATED TERMS
  1. Return On Investment - ROI

    A performance measure used to evaluate the efficiency of an investment ...
  2. Cash Return On Capital Invested ...

    A method of valuation that compares a company's cash return to ...
  3. Capital Employed

    1. The total amount of capital used for the acquisition of profits. ...
  4. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
  5. Cape Cod Method

    A method used to calculate loss reserves that uses weights proportional ...
  6. Kenney Rule

    A ratio of an insurance company’s unearned premiums to its policyholders’ ...
RELATED FAQS
  1. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  2. How does transfer pricing help business?

    Transfer pricing involves the trade of goods or services between two related companies, and both can come out the winner. ... Read Full Answer >>
  3. What does inventory turnover tell an investor about a company?

    The inventory turnover ratio determines the number of times a company's inventory is sold and replaced over a certain period. ... Read Full Answer >>
  4. What is a deferred tax liability?

    A deferred tax liability is an account that is listed on a company's balance sheet and occurs when its taxable income is ... Read Full Answer >>
  5. How are C-suite officers measured on performance?

    Evaluation of C-suite officers, especially the chief executive officer (CEO), is an important element of fundamental analysis. ... Read Full Answer >>
  6. How does economic order quantity assist a company with maximizing profits?

    Economic order quantity can assist a company in maximizing profits because it finds the number of units the company should ... Read Full Answer >>
Related Articles
  1. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  2. Markets

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  3. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  4. Markets

    Cash Flow On Steroids: Why Companies Cheat

    Pressure to be the best can sometimes push corporations to cheat. Learn how they do it and how to spot it.
  5. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  6. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
  7. Economics

    What is Deadweight Loss?

    Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  8. Economics

    How to Do a Cost-Benefit Analysis

    The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted.
  9. Economics

    Explaining the Cash Budget

    A cash budget is a plan for the inflows and outflows of cash for a business or an individual.
  10. Investing

    Apple or Google: Which is the Better Bet?

    Apple and Google have made many investors rich since the turn of the century. Which is more appealing going forward?

You May Also Like

Hot Definitions
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  4. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  5. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  6. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
Trading Center