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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Author

Kelvin Wong Loke Yuen is an experienced writer with a strong background in finance, specializing in the creation of informative and engaging content on topics such as investment strategies, financial ratio analysis, and more. With years of experience in both financial writing and education, Kelvin is adept at translating complex financial concepts into clear, accessible language for a wide range of audiences. Follow him on: LinkedIn.

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