What is 'Cash Return On Capital Invested - CROCI'
Cash return on capital invested (CROCI) is a method of valuation that compares a company's cash return to its equity. Developed by the Deutsche Bank's global valuation group, CROCI provides analysts with a cash flow based metric for evaluating the earnings of a company. Also known as "cash return on cash invested".
CROCI is found by the following formula:
BREAKING DOWN 'Cash Return On Capital Invested - CROCI'
Cash return on capital invested is a variation of the economic profit model. In essence, CROCI measures the cash profits of a company as a proportion of the funding required to generate them. It acknowledges both common and preferred share equity (as well as long-term funded debt) as sources of capital.