If an investor receives a cash-on-cash multiple of 2.5x, what does this imply?

When an investor receives a cash-on-cash multiple of 2.5x, it indicates that for every dollar they invested, they have received back $2.50 in cash. This means their total return is 2.5 times their initial investment, reflecting a significant profit from that investment. The calculation can be understood as follows: if an investor put in $1, a cash-on-cash multiple of 2.5x means they would have received a total of $2.50.

This metric is useful for assessing the liquidity and income generation of an investment, and it focuses specifically on the actual cash flows received rather than the total value of the investment, which might include unrealized gains or losses. Thus, a cash-on-cash multiple of 2.5x clearly highlights the cash returns in relation to the initial investment, making option B the accurate interpretation.