What is Cash on Cash Return? – An Introduction to Forex Trading

What is Cash on Cash Return? – An Introduction to Forex Trading

/ jounalist

What is Forex Trading?

Forex trading is the act of buying and selling foreign currencies on the global exchange market, which is the largest financial market in the world. Each currency is assigned a designated code and is traded at a specific exchange rate. Participating in the forex market can involve speculating on where a currency will move in the future and can be highly profitable, depending on the nature and intensity of trades. Investors need to conduct extensive research and use leveraged skills to make money from forex.

Leverage in Forex Trading

Leverage is an important concept in forex, which involves borrowing a large amount of capital with relatively low deposits. Leverage allows traders to trade with greater sums of money than they possess, so as to increase their chances of making money. Leverage also enables traders to borrow or lend money more efficiently, thereby enabling them to access more resources and thus increase their profits significantly. The use of leverage should be thoroughly studied and employed by forex traders to reap maximum benefits from their investment.

What is Cash on Cash Return?

Cash on cash return is a popular metric of return on investment that calculates the total amount of cash earned on the total amount of cash invested in a particular trade. It is an effective indicator which assesses cash flows from the purchase of a particular currency on the forex market and compares it to the amount of capital invested. It is highly important to consider cash on cash return as it provides a simple but effective way to measure the success of speculative trading strategies. This metric is usually expressed in percentage terms and allows investors to determine whether their strategy is proving to be profitable or not.

What is Cash on Cash Return?

Cash on cash return is a rate of return that measures the amount of cash that is generated from an investment relative to the total amount invested. This type of return is often used in real estate transactions to evaluate cash flow investment properties, as it takes into account the various financing costs related to the deal, such as loan origination fees, interest payments, taxes, maintenance costs, and insurance. It is important to calculate the cash-on-cash return in order to accurately assess the profitability of a real estate investment.

Cash on cash return is calculated by dividing the yearly cash flow generated by the investment property, after all expenses, by the total amount of money that was invested in the deal. The result is expressed as a percentage, which measures the return on the cash investment. It is important to note that this type of return does not account for depreciation or appreciation that could occur due to general market trends, and therefore it is not the best metric to evaluate the long-term performance of an investment.

What is The Value of Cash on Cash Return?

The value of cash on cash return is that it provides a measure of the expected return of a particular real estate investment before any loan financing is taken into account. This type of return is useful for assessing whether an investment is worthwhile in the short-term and for comparing the potential returns of different properties.

It is also helpful in calculating the breakeven point of an investment property. In other words, it is useful in determining the point at which the anticipated cash flow will cover all of the upfront investment costs, as well as any financing fees and other related costs.


In conclusion, cash on cash return is a useful metric for assessing the profitability of real estate investments. It measures the expected return on the cash invested in a property, taking into account all related expenses. This type of return is helpful in determining the breakeven point of a property and is useful for comparing potential returns of different investments. It is important to evaluate both cash on cash return and long-term accrual return to make an informed decision when investing in real estate.