Subtracting CAC from LTV reflects

• A. Profitability and cashflow
• B. Pricing optimization
• C. Customer churn rate
• D. Market share

Answer: (A)

Subtracting CAC from LTV shows the net value a customer contributes over their lifetime. CAC is the upfront cost to win a customer; LTV is the total revenue (or profit) you expect from that customer across the relationship. The difference reveals profitability per customer and the impact on cash flow: a positive result means each new customer adds net profit and helps cash flow; a negative result means the investment isn’t paid back. While pricing and retention affect LTV, and churn can reduce LTV, the subtraction itself is a straightforward measure of profitability and cash-flow viability of customer acquisition.