CHARACTERISTICS OF CASH FLOW RETURN ON INVESTMENT IN TERMS OF FINANCIAL PERFORMANCE MANAGEMENT

Value based financial performance measures are presented by their proponents as a major improvement over the traditional performance measures. By including a company's cost of capital in their calculation they could be applied in order to evaluate the value creating potential of a company. In this paper the measure Cash Flow Return on Investment (CFROI) will be investigated. It provides a definition of CFROI, outlines the calculation of the measure. Furthermore it focuses on the interpretation of the measure and considers the link between CFROI, Net Present Value (NPV) and Economic Value Added (EVA).