Cash flow Return On Investment (CFROI)

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Definition: Cash flow Return On Investment (CFROI)

It is a financial valuation model according to which the stock prices of a firm are based on the cash flow that a firm generates per unit market value of the capital that is invested in the firm, i.e.

CFROI= Cash Flows / Market value of capital employed

The cash flows in the equation are the summation of cash flows from all the 3 business activities which are investing, financing and operating activities.

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