Cash Flow Return on Equity, usually the abbreviation ROE (CF) is used. It is a term that refers how much cash flow seems to one dollar of invested capital. It is derived from the ratio ROE - Return on Equity, in which profit is replaced by cash flow. The ROE (CF) isn’t affected by depreciation nor creation of long-term reserves.
Cash Flow Return on Equity = Operating cash flow / Equity
The indicator belongs to indicators based on cash flow.
Use of the indicator in practice: In the enterprise it is used by CFO in financial analysis to analyze ratios. Indicators based on cash flow try to catch warning signs of potential credit problems and assess internal financial potential of the company.
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