Cash Flow Return on Investment

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Cash Flow Return on Investment

A model of determining the value of a company that assumes that the market sets prices based on cash flow instead of earnings. It is calculated thusly:

CFROI = Cash flow / Total investment.
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75 grade-point average (B on one-year stock return, a B for CFROI, a C on forecast CFROI and a B on sales growth).
and the timing thereof; ROIC and CFROI forecasts for 2011; expectations for cash generation, cash flow, ROE, ROA, and ROIC through 2011; plans for uses of its cash; clinical trial plans for Genz-112638; expectations regarding the potential of the products to be acquired from Bayer and the timing of that transaction, including alemtuzumab-MS; expectations for receipt of approval of alemtuzumab as a treatment for MS and an advanced phosphate binder as a treatment for patients with renal disease, and the timing thereof; revenue forecast for the oncology and transplant businesses for 2011; expected timing for receipt of clinical data for Prochymal in GvHD and for mipomersen in hoFH; and plans to submit a marketing applications in the U.
As an example of Table l's use, consider a cash-flow return-on-investment (CFROI) metric where CFROI = operating cash flows/investment.
2 Hewitt's research found that for the average Fortune 500 company with about $10 billion in sales, a 10-point improvement in TQ Retain could improve a company's CFROI by 0.
The ValueSearch(TM) platform offers comprehensive software for leveraging the CFROI Valuation framework providing clients direct access to the tools and data necessary to achieve greater investment insight.
and Canadian companies by sales and is based, in part, on how well they have performed in terms of cash flow return on investment, or CFROI, a proprietary metric of CSFB Holt.
CFROI measures the real cash returns on all capital invested in a company, eliminating the effects of inflation and accounting practices.
The basic CFROI premise, which is defined by a methodology developed by HOLT, is that the stock market sets prices based on economic performance and cash flow - not on accounting measures such as reported earnings.
It's the lever that unhinges the door between managers and the information they need to make decisions in areas such as CFROI, EVA and activity-based costing.
Yet Gillette still generates massive operating cash flow--as the CFROIs show--with phenomenally high returns that are well above its cost of capital or market averages.