Mergers & Acquisitions

Resources: Glossary

Don’t be confused or intimidated by any terms or abbreviations in the M&A world. You’ll find answers here.

Cash-on-Cash Return

Definition

The ratio of returns in the form of cash related to the total amount of cash invested, expressed as a percentage.

Example

If a $1,000,000 business is purchased with a $200,000 down payment, and the cash flow is $100,000 after debt service, then the cash-on-cash return is 50% ($100,000 cash flow divided by $200,000 cash down payment = 50%).

Tips

In contrast, the return on investment (ROI) measures the return divided by the total investment. In the example above, the ROI would be 10% ($100,000 divided by $1,000,000 = 10%).