DEFINITION of Cash Return On Gross Investment - CROGI
Cash Return On Gross Investment (CROGI) is a gauge of a company's financial performance that measures the cash flow a company generates with its invested capital. CROGI is calculated by dividing gross cash flow after taxes by gross investment. CROGI is important because investors want to determine how effectively a company makes use of the money it invests in itself.
BREAKING DOWN Cash Return On Gross Investment - CROGI
Cash Return On Gross Investment (CROGI) is one of numerous measurements that can be used to assess a company's value. Other measurements include discounted free cash flow, economic value added, enterprise value, return on capital employed (ROCE) and return on net assets (RONA), to name a few. Each of these measurements is calculated using a subset of the numbers companies report in their financial statements, such as revenues, expenses, debt and taxes.
A similar measurement, Cash Return on Inflation Adjusted Gross Investment (CROIGI), allows investors to add an inflation adjustment to the gross fixed assets to approximate their value in today's dollars. This gives a fair value to the asset base, regardless of age. For example, CROIGI would allow an investor to determine that a 10-year-old manufacturing plant's return may be lower than a new plant's return once the values of the investments are compared in today's dollars.