The Cash Flow Per Share Calculator is a financial tool designed to provide insights into how much cash flow a company generates for each outstanding share of its common stock. This metric, called Cash Flow Per Share (CFPS), offers a detailed view of a company’s cash-generating efficiency on a per-share basis. Investors and analysts use CFPS to evaluate a company’s ability to generate cash, which is essential for sustaining dividends, funding growth, and maintaining financial stability.
CFPS is especially helpful because it focuses on cash flow from operations, providing a clearer picture of a company’s cash health. Unlike earnings per share (EPS), CFPS removes non-cash expenses like depreciation and amortization, making it a purer measure of cash profitability and liquidity.
Key Benefits of Using the Cash Flow Per Share Calculator
- Evaluates Cash Generation: CFPS shows how effectively a company generates cash flow for each share, helping assess operational health.
- Supports Investment Analysis: Investors use CFPS to compare companies within the same industry to identify the most cash-efficient.
- Tracks Financial Health: Helps in understanding a company’s ability to cover obligations, reinvest in growth, or return capital to shareholders.
- Aids in Dividend Assessment: CFPS helps determine whether a company has sufficient cash flow to sustain dividend payments.
Formula
The formula for calculating Cash Flow Per Share is as follows:
Cash Flow Per Share = (Operating Cash Flow – Preferred Dividends) / Number of Outstanding Shares
Where:
- Cash Flow Per Share (CFPS): Cash generated per share of common stock (in currency per share).
- Operating Cash Flow: Total cash flow from the company’s core operations (in currency).
- Preferred Dividends: Dividends paid to preferred shareholders, if any (in currency).
- Number of Outstanding Shares: Total shares of common stock currently outstanding.
This formula evaluates the cash generated by a company for each outstanding share after paying any preferred dividends. CFPS serves as an indicator of a company’s cash flow capacity for each common shareholder.
Common Terms for Cash Flow Per Share
To make the calculator easier to understand, here’s a table of common terms associated with Cash Flow Per Share calculations:
| Term | Definition |
|---|---|
| Cash Flow Per Share (CFPS) | Cash flow generated per share of common stock, reflecting the company’s cash health per share. |
| Operating Cash Flow (OCF) | Total cash from core business activities, excluding investments or financing activities. |
| Preferred Dividends | Dividends paid to preferred shareholders, subtracted to reflect cash available to common shareholders. |
| Outstanding Shares | Total shares of common stock currently held by investors, used to calculate per-share metrics. |
| Earnings Per Share (EPS) | Net income divided by outstanding shares; includes non-cash expenses, unlike CFPS. |
| Free Cash Flow (FCF) | Cash remaining after capital expenditures, often used in broader cash flow analysis. |
| Dividend Payout Ratio | Percentage of earnings paid out as dividends, useful in assessing cash flow sufficiency. |
Familiarity with these terms helps users understand CFPS and its relevance in evaluating a company’s cash flow per share.
Example of Cash Flow Per Share Calculator
Let’s consider an example to illustrate how the Cash Flow Per Share Calculator is used.
Scenario: ABC Electronics, a company specializing in consumer electronics, wants to determine its cash flow per share for the last fiscal year. Here’s the financial data available:
- Operating Cash Flow: $500,000 generated from its primary operations.
- Preferred Dividends: $50,000 paid to preferred shareholders.
- Number of Outstanding Shares: 200,000 shares of common stock.
Using the formula:
Cash Flow Per Share = (Operating Cash Flow – Preferred Dividends) / Number of Outstanding Shares
Substituting the values:
Cash Flow Per Share = ($500,000 – $50,000) / 200,000
Cash Flow Per Share = $450,000 / 200,000 = $2.25
Result: ABC Electronics has a cash flow per share of $2.25. This means that for each outstanding share of common stock, the company generated $2.25 in cash flow from its operations after paying preferred dividends.
This example shows how the Cash Flow Per Share Calculator can help companies and investors understand cash flow generation per share and evaluate financial health.
Most Common FAQs
Answer: Cash Flow Per Share is crucial because it measures the cash generated per share of common stock, providing insight into a company’s ability to generate cash for each share. Unlike Earnings Per Share (EPS), CFPS reflects cash flow from operations, offering a clearer picture of liquidity and operational efficiency, which is valuable for dividend stability and growth planning.
Answer: Cash Flow Per Share focuses on cash generated from operations and excludes non-cash expenses like depreciation, which EPS includes. This makes CFPS a better measure of a company’s true cash-generating ability, whereas EPS may be affected by accounting adjustments that don’t involve actual cash flow.
Answer: A higher CFPS is generally favorable, indicating that the company generates significant cash per share, which can support dividends, growth investments, and debt repayment. However, “good” CFPS varies by industry and company size; it’s best to compare CFPS with industry peers to assess relative performance.