Cash Flow Per Share

Article byTanmay Agarwal
Reviewed byDheeraj Vaidya, CFA, FRM

What is Cash Flow Per Share (CFPS)?

Cash Flow per Share of the company shows the cash flow portion of the company, which is allocated against each of the common stock presented in the company. It is calculated by dividing the cash flow which the company earns during an accounting period by total outstanding common stock.

Key Takeaways

  • Cash flow per share of the company displays the company’s cash flow portion, given against each common stock. It can be calculated by dividing the company’s cash flow by the total outstanding common stock in an accounting period.
  • It is evaluated as a ratio that divides the cash flows created under regular business workings after adjusting for preferred dividends in a reporting period by the total outstanding shares or the weighted average number of shares.
  • Investors may also analyze cash flow statements and compute financial ratios such as Cash Flow Per Share other than EPS or P/E ratio.

How to Calculate Cash Flow Per Share?

Cash flow per share can be calculated as a ratio that divides the cash flows generated under normal business operations after adjusting for preferred dividendsPreferred DividendsPreferred dividends refer to the amount of dividends payable on preferred stock from profits earned by the company, and preferred stockholders have priority in receiving such dividends over common more during a reporting period (yearly, semi-annually, or quarterly) by the total number of shares outstandingShares OutstandingOutstanding shares are the stocks available with the company's shareholders at a given point of time after excluding the shares that the entity had repurchased. It is shown as a part of the owner's equity in the liability side of the company's balance more or the weighted average number of sharesWeighted Average Number Of SharesWeighted Average Shares Outstanding is a calculation used to estimate the variations in a Company’s outstanding shares during a given period. It is determined by multiplying the outstanding number of shares (consider issuance & buybacks) in a given reporting period with their individual time-weighted portions. read more. A weighted average number is generally used because the number of outstanding common shares can fluctuate over the given period.

Cash Flow Per Share = (operating cash Flow – Preferred Dividends) / Weighted Average Number of Shares
Cash Flow Per Share

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Source: Cash Flow Per Share (

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It can also be calculated using net income or EBIT (earnings before interest and taxes)EBIT (earnings Before Interest And Taxes)Earnings before interest and tax (EBIT) refers to the company's operating profit that is acquired after deducting all the expenses except the interest and tax expenses from the revenue. It denotes the organization's profit from business operations while excluding all taxes and costs of more by adding back the cost of depreciation and amortization to EBIT, which are non-cash transactionsNon-cash TransactionsNon-cash expenses are those expenses recorded in the firm's income statement for the period under consideration; such costs are not paid or dealt with in cash by the firm. It involves expenses such as more and do not involve actual cash flows from operationsCash Flows From OperationsCash flow from Operations is the first of the three parts of the cash flow statement that shows the cash inflows and outflows from core operating business in an accounting year. Operating Activities includes cash received from Sales, cash expenses paid for direct costs as well as payment is done for funding working more by any outflow.

Cash Flow per Share = (EBIT * (1 – tax rate) + Depreciation) / Common Shares Outstanding


Example #1

Mr. Unknown of Ethical analytics has to calculate the Cash Flow Per Share (CFPS) of Hypothetical Pvt. Ltd using the following data extracted from the financial statements of the company:-Financial Statements Of The Company:-Financial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all more

cfps example 1.1

Calculation of Weighted Average Number of Shares

For 2018 8-lakh shares for a full year and 2-lakh shares for a half-year

=8+2*6/12 =9 Lakh

For 2019 10-lakh shares for the full year

=10*12/12=10 Lakh

Therefore, the Calculation of CFPS for 2019 is-

CFPS Example 1.2

Similarly, we have done the calculation of CFPS for 2018

CFPS Example 1.3

Example #2

Ethical analytics again tasked Mr. Unknown to calculate the Cash Flow Per Share (CFPS) of another company XYZ Pvt. Ltd. But this time, data from cash flows statementsCash Flows StatementsCash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. read more are not available but are available from the income statementIncome StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user more as given below:-

CFPS Example 2.1


Calculate CFPS for 2019 using below formula

Cash Flow per Share Example 2.2
  • Cash Flow per Share Formula = (EBIT * (1 – tax rate) + Depreciation) / Common Shares Outstanding
  • =(120*(1-36%)+40)/10
  • =11.68

Similarly, we have done the calculation of CFPS for 2018

Cash Flow per Share Example 2.3
  • = (100*(1-30%)+20)/9
  • =10

Why is Cash Flow Per Share Better than EPS?

EPS or Earnings per ShareEPS Or Earnings Per ShareEarnings Per Share (EPS) is a key financial metric that investors use to assess a company's performance and profitability before investing. It is calculated by dividing total earnings or total net income by the total number of outstanding shares. The higher the earnings per share (EPS), the more profitable the company more is the most popular profitability metric used by investors and analysts to measure the number of profits allocated to its equity (common) shareholders. It is calculated by dividing its net income or EAES (earnings available to equity shareholders) by the weighted average number of outstanding shares.

EBIT or net income is calculated after the company generates revenues (sales). Often, sales are made on credit, i.e., zero cash inflow, but it increases the company’s earnings. Also, EBIT is calculated after deducting the cost of depreciation and amortization (non-cash expenses), and additionally, net income will be calculated after subtracting various non-recurring and irregular expenses.

All these factors can deflate the value of net income artificially. Also, EPS can be easily manipulated through liberal accounting practicesAccounting PracticesAccounting practice is a set of procedures and controls used by an entity's accounting department to keep track of accounting records and entries. Other reports are generated based on accounting records, such as financial statements, cash flow statements, fund flow statements, payroll, tax workings, payment and receipts statements, and so on, and they form the basis of the auditor's reliance while auditing the financial more.

This example will try to justify the popular quote about cash flows: “Cash is the King.”

Kingsman Pvt. Ltd has an innovative product with low production costs and expected high demands. With high enthusiasm, they invest heavily in setting up a production line, building warehouses, and marketing their product. The company issued 100,000 equity shares at 10 per share to meet all of its expenses.

The demand was high as expected, but the new players generated most of their sales on credit. And due to the low cost of depreciation, the profit (net income) figure appears huge initially. But later, the company starts lacking the availability of cash in its hands. The company now has to lower its production capacity, cut its costs, or apply for some loan, which further has costs.

The company’s income statement for the first quarter is as follows:-

Cash Flow per Share Example 3.1

EPS = Net Profit / Number of shares outstanding = 490 / 100 = 4.9

The Net Profit values are huge, and the EPS ratio is quite good, but a crisis for cash arrives at the company.

The company’s management must have checked the cash flow statementsCash Flow StatementsA Statement of Cash Flow is an accounting document that tracks the incoming and outgoing cash and cash equivalents from a more and calculated a more reliable profitability ratio of CFPS.

Operating Cash Flow = Operating Cash Inflow – Operating Cash Outflow

= 500 – (280+210) = 10

So the calculation of CFPS is as follows,

Cash flow per share formula = Operating Cash Flow / No. of shares outstanding

= 10 / 100

= 0.1

The Kingsman, if tracked its cash flows earlier, would have known its poor cash collection performance and would have avoided the situation of crisis. High EPS indicates the expected earnings the shareholders may get in the form of dividends for every share they hold. CFPS shows the actual cash flow carried by the Kingsman during the quarter.


Frequently Asked Questions (FAQs)

Is a high cash flow per share good?

The surging free cash flow to outstanding shares value is good since the company is considered to have better probability and more economic and operational flexibility. Thus, free cash flow per share is also known as free cash flow for the company.

What is a good cash flow per share ratio?

The higher ratio is favored by investors, creditors, and analysts as more than 1.0, meaning a company may make up the current short-term liabilities. Yet, earnings may be left after clearing the liabilities

Can cash flow per share be negative?

Yes, the cash flow per share can be negative. However, this occurs when a company’s cash flow from operations is negative and significant outstanding shares exist. A negative cash flow per share indicates that the company is experiencing financial difficulties and may have trouble meeting its financial obligations.

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This article has been a guide to Cash Flow Per Share and its definition. Here we discuss how to calculate Cash Flow Per Share and practical examples. We also discuss the difference between CFPS vs. EPS. You can learn more about accounting from the following articles –