Fundamental Glossary / Profitability Metrics
Cash Return on Capital Invested
A cash version of return on capital, using cash earnings in place of accounting profit.
Formula
Cash operating profit after tax / invested capital. Cash operating profit is often EBITDA minus maintenance capital expenditure, and minus cash tax.
What it means
Accounting returns can look strong while cash is absorbed by working capital or by capital expenditure that depreciation understates. Cash return on capital invested forces the numerator to be cash.
There is more than one house definition. The constant idea is: cash generated by operations, after the spending required to sustain them, divided by the capital those operations use.
How to read it
When the cash return sits well below ROCE for several years, accounting profit is running ahead of cash. That gap deserves an explanation before you capitalise the accounting return into a valuation.
What to watch
Maintenance capital expenditure is an estimate. Call too much of the budget "growth capex" and the cash return looks excellent. Be conservative about what must be spent just to hold the current profit.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.