Business glossary
Cash-on-cash return
Annual pre-tax cash flow divided by the cash invested, usually expressed as a percentage.
Example
If an investment produces $6,000 of annual pre-tax cash flow and required $50,000 of invested cash, its cash-on-cash return is $6,000 ÷ $50,000 × 100 = 12%.
How it differs from related terms
Cash-on-cash return uses invested cash, not the full asset purchase price or accounting revenue. It does not by itself capture appreciation, sale proceeds or every investment risk. State which cash flows and period the calculation includes.
Frequently asked questions
What is an example of cash on cash return?
If an investment produces $6,000 of annual pre-tax cash flow and required $50,000 of invested cash, its cash-on-cash return is $6,000 ÷ $50,000 × 100 = 12%.
How should cash on cash return be interpreted?
Cash-on-cash return uses invested cash, not the full asset purchase price or accounting revenue. It does not by itself capture appreciation, sale proceeds or every investment risk. State which cash flows and period the calculation includes.