Before tax cash flow (BTCF = CFO – Debt Service) divided by the total equity contribution to date, expressed on an annual basis as a percentage. While the Cash-on-Cash Return (CoC) does not account for taxes and does not take into account the time value of money, it is a useful screening tool used by investors when evaluating potential investments.
The Cash-on-Cash Return of an investment is especially important to core investment strategy investors more interested in stable cash flow than in asset appreciation. The Cash-on-Cash Return is typically used alongside other return metrics such as the Equity Multiple, Internal Rate of Return, and Free and Clear Return to appropriately assess an investment.