Cash Flow Per Share Calculator
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Calculating Cash Flow Per Share (CFS) is a crucial financial metric for investors and analysts. It helps in assessing the amount of cash generated by a company on a per-share basis, providing a clear picture of the company's financial health and profitability.
Historical Background
The concept of Cash Flow Per Share evolved as investors sought more transparent and accurate measures of a company's financial performance beyond traditional metrics like earnings per share (EPS). It reflects the actual cash available to shareholders, offering a more tangible assessment of financial strength.
Calculation Formula
To calculate Cash Flow Per Share, use the following formula:
\[ CFS = \frac{CF}{S} \]
where:
- \(CFS\) is the Cash Flow Per Share ($/share),
- \(CF\) is the total cash flow ($),
- \(S\) is the number of shares.
Example Calculation
Given:
- Total cash flow ($) = 89
- Number of shares = 12
Applying the formula:
\[ CFS = \frac{89}{12} \approx 7.41667 \text{ $/share} \]
Importance and Usage Scenarios
Cash Flow Per Share is particularly important for investors looking to gauge the financial stability of a company and its ability to generate cash, pay dividends, and fund operations and expansions. It's a more reliable indicator than earnings in some cases, as it's harder to manipulate with accounting practices.
Common FAQs
-
Why prefer Cash Flow Per Share over Earnings Per Share?
- Cash Flow Per Share offers a more accurate picture of the cash available to shareholders, unaffected by accounting adjustments, making it a more reliable indicator of financial health.
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How can Cash Flow Per Share influence investment decisions?
- A higher Cash Flow Per Share indicates a company's efficiency in generating cash, which can be a positive signal for investors seeking stable dividends or investment growth.
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Can Cash Flow Per Share be negative?
- Yes, if a company's total cash flow is negative, indicating that it is spending more cash than it is generating, leading to potential concerns about its financial sustainability.
Understanding and calculating Cash Flow Per Share provides valuable insights into a company's financial operations, aiding investors and analysts in making informed decisions.