CASH-ON-CASH RETURN Definition

CASH-ON-CASH RETURN is the ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage. It is often used to evaluate the cash flow from income-producing assets. It is generally considered a quick napkin test to determine if the property qualifies for further review and analysis. Cash on Cash analyses are generally used by investors looking for properties where cash flow is king, however, some use it to determine if a property is under priced, indicating instant equity in a property. It is calculated: Annual Before-tax Cash Flow divided by the Total Cash Invested.

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TARGET is the goal intended to be attained and which is believed to be attainable, e.g. sales target, margin target, or profit target.

EFFECTIVE MATURITY is the date used in place of the final maturity for bonds with call, put or prepayment features. This date mathematically incorporates the effect of those optional maturity dates.

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