When analyzing an investment, what is crucial alongside its cash-on-cash return?

When analyzing an investment, considering projected future earnings is crucial because it provides insight into the potential profitability of the investment over time. Cash-on-cash return primarily measures the immediate cash flow generated relative to the cash invested; however, understanding future earnings projections helps to evaluate the long-term viability and growth potential of the investment. By incorporating projected earnings, investors can better assess the overall return on investment, compare it with other opportunities, and make informed decisions regarding potential risks and returns.

Projected future earnings take into account factors such as growth in revenue, expenses, or changes in the market that could impact overall profitability. This forward-looking perspective is essential for effective financial analysis and investment strategy development.