Cash earnings per share compares a company's cash flow to the number of shares it has currently outstanding. It brings the cash flow figure down to the level of the individual shareholders. You can find this measure by dividing operating cash flow by number of shares. This is a handy number because it shows exactly how much profit each share is worth.
Consider pies at a holiday party. Everyone has that one relative that binges on the pie you like, so you have to call dibs right? Don't feel bad, we all do this. Pie is serious business. At any given time, you want to know how big a slice you have coming to you, even if you don't eat it all right this second. Cash earnings per share is like that...it's how much of the pie is theoretically yours.
The figure should not be confused with earnings per share, which is net income divided by shares. Net income is not necessarily all available to be paid out to investors at a given moment, whereas cash is theoretically more easily distributed. (Not that the company will necessarily hand out any of that cash; that's up to the board of directors...it's not like you can go into company HQ with your shares and demand your cash earnings per share.) Generally, the cash earnings per share is considered a more accurate way to measure the stability of the business.
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Finance: What is Earnings Per Share (EPS...33 Views
finance a la shmoop what is earnings per share or EPS? okay you know the lemonade
stand the one with 20 grand in sales and 16 grand in gross profits and yeah will [Balance sheet for Lemonade Stands R Us appears]
spare you the gross jokes you know the customer asks lemonade.. what the fly
was doing in his lemonade and yes of course she said the backstroke what else
would you expect from the people at Schmo really?
so after gross profits there were operating expenses like those and then
operating profits down here that 7,500 thing then there were taxes and yeah
there are always taxes we can grumble about and then finally net income aka [Net income appears on balance sheet]
earnings but then below earnings you'll see that there are a hundred shares in
this little company the founder owns 60 of them mom owns 10 the new stepdad owns
20 he was guilted into it by you know the divorce lawyer and Enrique the
gardener for some reason who has cleverly weaseled his way into the
families arts and minds owns the last 10 its annual report time and the investors
want to know what their earnings per share were so that they can all compare
relative performance on their investments right so the total earnings
of the company in this example was five thousand two hundred fifty bucks which
means that the earnings per share of our little lemonade stand company here or
that 5,250 figure divided by a hundred or 52.50 a share that's [EPS formula appears]
what each share earned if you divvy the company into a hundred little pie slices
or parts so yeah earnings per share equals earnings per slice o pie or wait
lemonade pie has that been done yet time for a new business venture what do you [A plate of lemonade pie appears]
think we're taking investors just call us please
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