Capitalization Rate
This represents the relationship between the Laundromat and the net income it produces. The greater the capitalization rate the greater the income producing capability. It is calculated by dividing the Net Operating Income by the Gross Sales Price.

Cash on Cash
This is the ratio of Operating Cash Flow (pre-tax) to the Initial Investment.

Cumulative Cash Flow
This is the Operating Income added together from year to year from the Laundromat less the outflow due to all Expenses and Debt Service.

Equity Less Cash Flow
This defines how rapidly the Laundromat returns the Initial Investment and describes the rate of the "payback" of the down payment.

Gross Income Multiplier
This is often called the "times gross factor." It is calculated by dividing the Gross Sales
Price by the monthly Operating Income of the property. 

Gross Spendable Proceeds
This is equal to the Net Operating Proceeds less the Debt Service.

Initial Investment
This is the cash down payment at the time of purchase of the Laundromat.

Net Income Multiplier
This is often called the "times net factor." It is calculated by dividing the Gross Sales
Price by the monthly Net Operating Income.
  
Net Operating Income
This is equal to the annual Operating Income of the Laundromat less the sum of the Total Expenses required to operate the Laundromat.
 
Net Operating Proceeds or Equity
This is equal to the Gross Sales Price less Commission, Closing Costs & Loan Balance.

Net Spendable Proceeds
This is equal to the Gross Spendable Proceeds less Taxes. Negative value, has positive effect.
Returned Equity
This is the difference between the Gross Selling Price less Commission, Costs, Loan Balance and the Initial Investment. 
 
Return on Down payment
This is calculated by dividing the Net Spendable Proceeds by the Initial Investment.

Return on Equity
This is calculated by dividing the Net Spendable Proceeds by the equity.  Initial Investment + the Returned Equity. This indicates the size of the annual cash flow relative to the equity being built up.
 
Return on Investment
This is the overall return on the invested capital. It is calculated by dividing the cumulative net return (Net Spendable Proceeds + Returned Equity less Initial Investment) by the Initial Investment. 

Total Investment
This is the Initial Investment less the Cumulative Cash Flow.

714-630-9274

 INVESTMENT TERMINOLOGY

Provided for general information only. Check with your own attorney for current legal definitions.

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