Cash Flow Return on Investment (CFROI) | Community Health

Cash Flow Return on Investment (CFROI) is a financial metric that calculates the return on investment based on the cash flows generated by an asset or project, rather than its accounting profit. Developed by Bartley Madden in the 1980s, CFROI has been widely adopted by investors and financial analysts to evaluate the performance of investments. The metric takes into account the initial investment, cash inflows, and cash outflows, providing a more accurate picture of an investment's profitability. CFROI is particularly useful for evaluating investments with non-cash items, such as depreciation and amortization, which can distort accounting profits. With a CFROI of 10% or higher, an investment is generally considered attractive, while a CFROI below 5% may indicate a poor investment. As of 2022, companies like Microsoft and Johnson & Johnson have reported CFROI values above 15%, indicating strong investment returns.