Operating Cash Flow Per Share

Definition: Operating cash flow per share is used to measure a company's financial strength and is widely used by financial analysts in valuing stocks. It gives a better guide as compared to the reported earnings per share (EPS) as earnings data can easily be manipulated while cash flow is more likely to be accurate.

Formula:

Operating cash flow (OCF) per share = (Operating Cash Flow - Preferred Dividends) / Common Shares Outstanding
Or,
Cash flow per share = (Profit after tax + Depreciation + Non cash charges) / Number of equity shares

Example 1:
Calculate the OCF per share for Lincoln plc, given the following information:
Net cash flow from operating activities $100,000
Ordinary share capital of $0.50 each: $500,000

Solution:
Number of ordinary shares issued = 500,000 / 0.50 = $1,000,000
OCF per share = 100,000 / 1,000,000 = $0.10

Example 2:
Eric Ltd has the following information: Depreciation $50,000; Profit before tax $250,000; Tax $30,000; Number of equity shares 900,000.
Then,
Profit after tax = 250,000 - 30,000 = $220,000
Cash flow per share = (220,000 + 50,000) / 900,000 = $0.30

* Next: Dividend Per Share (DPS) Calculation
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