Cash Return on Assets Definition and Explanation

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Quick Definition

Shows how well a company can create cash from its investment in assets.

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Cash Return on Assets Formula

Explanation of Cash Return on Assets

The Cash Return on Assets measures the Cash Flow from Operations in relation to Total Assets. Cash Return on Assets basically shows how well (or how poorly) the company is generating cash from its asset investments. Similar to Return on Total Assets, the company hopes to generate as much revenue as possible from its assets.

Importance of Cash Return on Assets

This calculation is especially important to evaluating companies with large investments in assets, such as manufacturing and processors of raw materials. These companies need to maximize their investments, as new manufacturing plants and off-shore oil drilling rigs are critical investments and purchases of big-ticket items like these are large enough to alter financial statement results significantly.