In one sentence
Annual pre-tax cash flow divided by the equity invested, a simple measure of current yield to an investor.
The longer version
Cash-on-cash return measures the annual cash an investment throws off relative to the cash put in, before any appreciation. It captures current income, not total return, which makes it easy to reason about.
It complements IRR and equity multiple: cash-on-cash speaks to income today, the others to total return over time.
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