Abstract
This chapter details the calculation of a cash flow return on investment (CFROI) from fiscal year 1993 financial statements for Hershey Foods Corporation. HOLT Value Associates maintains a monitored database of historical and forecast data for nearly all firms worldwide that are of interest to professional money managers. HOLT's CFROI calculations are based on information contained in originally published financial reports; the calculations do not use restated data. The important point is that readers understand how the CFROI calculations are logically consistent and fit within the complete valuation model. HOLT's database does not include adjustments for these provisions. If more detailed analysis suggests that reserves are both substantial and being manipulated, then adjustments should be made. Cash available from depreciation charges is implicitly deemed to be reinvested, under the “going concern” assumption. From an economic perspective, performance focuses on total cash generated from all the firm's assets, irrespective of whether the capital for such has been supplied by debt holders or by equity owners. The cash inflow for a specified year is recorded in dollars having the purchasing power of the specified year, that is, in current dollars.
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