Cash Return on Invested Capital (CROIC)
Calculate the cash return on invested capital (CROIC), the free cash flow a company generates on the capital that shareholders and lenders have invested in it.
Where the return on invested capital measures the after-tax operating profit, CROIC measures the cash left after the investments needed to keep and grow the business, so it shows how much of the return can actually be paid out, used for buybacks or reinvested. The invested capital is the same as in get_return_on_invested_capital (total equity plus total debt, averaged over the period), so the two compare directly: a CROIC persistently below the ROIC means profits are tied up in working capital or capital expenditure.
The formula is as follows:
\[\text{Cash Return on Invested Capital} = \text{Free Cash Flow} / (\text{Average Total Equity} + \text{Average Total Debt})\]Also known as: CROIC, cash ROIC, FCF ROIC, free cash flow return on invested capital.
Cash Return on Invested Capital (CROIC) in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_cash_return_on_invested_capital as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["CAT", "DE", "CMI"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_cash_return_on_invested_capital()
Or, after setting up the Finance Toolkit MCP, ask:
What cash return on invested capital did Caterpillar, Deere and Cummins earn from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| CAT | 0.0885 | 0.0964 | 0.1776 | 0.153 | 0.1216 |
| CMI | 0.1064 | 0.0642 | 0.1543 | 0.0155 | 0.118 |
| DE | 0.0814 | 0.013 | 0.0521 | 0.0509 | 0.0362 |
Parameters
get_cash_return_on_invested_capital accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum flows (income and cash flow statement items) over, with balance sheet items averaged over the same number of period ends. E.g. 4 with quarterly data gives the trailing twelve months (TTM) and 3 with annual data a three-year cumulative figure. Defaults to None, which uses single-period flows (per quarter and not annualized with quarterly data) against the average of the opening and closing invested capital, as for the return on invested capital. | 4 |