In investing, the cash-on-cash return is the ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage.
cash-on-cash return
=
annual before-tax cash flow
total cash invested
{displaystyle {mbox{cash-on-cash return}}={frac {mbox{annual before-tax cash flow}}{mbox{total cash invested}}}}
It is often used to evaluate the cash flow from income-producing assets. Generally considered a quick napkin test to determine if the asset qualifies for further review and analysis. Cash on Cash analyses are generally used by investors looking for properties where cash flow is paramount, however, some use it to determine if a property is undervalued, indicating instant equity in a property.
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