Cash Per Share Definition (2024)

FAQs

What does cash per share mean? ›

Cash per share is the broadest measure of available cash to a business divided by the number of equity shares outstanding. Cash per share tells us the percentage of a company's share price available to spend on strengthening the business, paying down debt, returning money to shareholders, and other positive campaigns.

Interpretation of Operating Cash Flow Ratio

A higher ratio – greater than 1.0 – is preferred by investors, creditors, and analysts, as it means a company can cover its current short-term liabilities and still have earnings left over.

The net cash per share is calculated by adding the level of cash and cash equivalents, subtracting the long-term debt and dividing the result by the number of shares outstanding.

A good price to cash flow ratio is anything below 10. The lower the number, the better the value of the stock. This is because a lower ratio indicates that the company is undervalued with respect to its cash flows.

Free cash flow per share (FCF) is a measure of a company's financial flexibility that is determined by dividing free cash flow by the total number of shares outstanding. This measure serves as a proxy for measuring changes in earnings per share.

Cash EPS takes into account the cash flow generated by a company on a per share basis, while EPS looks at the net income generated on a per share basis, for a given period.

Healthy cash flow is the result of operations that run efficiently and smoothly.

There is no ideal figure, but a cash ratio is considered good if it is between 0.5 and 1. For example, a company with $200,000 in cash and cash equivalents, and $150,000 in liabilities, will have a 1.33 cash ratio.

There is no specific rule of thumb for those wondering what constitutes a good return rate. There seems to be a consensus amongst investors that a projected cash on cash return between 8 to 12 percent indicates a worthwhile investment.

A “good” free cash flow conversion rate would typically be consistently around or above 100%, as it indicates efficient working capital management.

How much free cash should I have? ›

A long-standing rule of thumb for emergency funds is to set aside three to six months' worth of expenses. So, if your monthly expenses are $3,000, you'd need an emergency fund of $9,000 to $18,000 following this rule. But it's important to keep in mind that everyone's needs are different.

Traditionally, any value under 1.0 is considered desirable for value investors, indicating an undervalued stock may have been identified. However, some value investors may often consider stocks with a less stringent P/B value of less than 3.0 as their benchmark.

The higher the earnings per share of a company, the better is its profitability. While calculating the EPS, it is advisable to use the weighted ratio, as the number of shares outstanding can change over time.

Free cash flow per share measures the amount of cash spun off by a business. It is calculated as total free cash flow, divided by the weighted average number of shares outstanding during the measurement period.

If your receivables less your payables results in a negative number, you have negative cash flow from operations. The amount of your income is less than the expenses you must pay. You're making too little sales or you're spending too much.

There are three cash flow types that companies should track and analyze to determine the liquidity and solvency of the business: cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. All three are included on a company's cash flow statement.

An operating cash flow ratio of less than one indicates the opposite—the firm has not generated enough cash to cover its current liabilities. To investors and analysts, a low ratio could mean that the firm needs more capital.

The cash ratio indicates the amount of cash that the company has on hand to meet its current liabilities. A cash ratio of 0.2 would mean that for every rupee the company owes creditors in the next 12 months it has 0.2 in cash. 0.2 is considered to be the ideal cash ratio.

How Much Cash Reserve Should A Company Have On Hand? According to experts, setting aside 3-6 months' worth of expenses is a good rule of thumb.

A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to covers its debts. A current ratio below 1 means that the company doesn't have enough liquid assets to cover its short-term liabilities.

Is 13% cash on cash return good? ›

In general, most experts agree that between 8-12% is a good cash on cash return. This, however, is calculated based on an individual property. City level averages might not show a cash on cash return in this range, so it's important to do calculations for each specific income property that you consider buying.

What Is The 1% Rule In Real Estate? The 1% rule of real estate investing measures the price of the investment property against the gross income it will generate. For a potential investment to pass the 1% rule, its monthly rent must be equal to or no less than 1% of the purchase price.

The Bottom Line. If a company's cash flow is continually positive, it's a strong indication that the company is in a good position to avoid excessive borrowing, expand its business, pay dividends, and weather hard times.

The Rule of 40 is a principle that states a software company's combined revenue growth rate and profit margin should equal or exceed 40%. SaaS companies above 40% are generating profit at a rate that's sustainable, whereas companies below 40% may face cash flow or liquidity issues.

Investors who need funds for emergencies or are saving for high-ticket purchases will want to invest more in cash. Investors with greater risk tolerance and longer-term horizons for investing can put more money toward stocks.

Net cash per share is calculated as Cash And Cash Equivalents minus Total Liabilities minus Minority Interest and then divided by Shares Outstanding (EOP). Apple's net cash per share for the quarter that ended in Dec. 2022 was $-15.06.

Compared with cash, shares have a far stronger long-term track record when measured against inflation. As the table below highlights, the average inflation-adjusted annual returns for shares stretching back 120 years have been more than 5%, whereas for cash it's been only around 1%.

Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss. Cash doesn't grow in value; in fact, inflation erodes its purchasing power over time. Cashing out after the market tanks means that you bought high and are selling low—the world's worst investment strategy.

If a stock you hold has achieved your objectives – that is, reached a target price that you have set – it could be time to sell and reinvest the proceeds somewhere else.

The Stock Has Reached Your Target Price

This is the figure that they would be happy to sell the stock for. While a set price may be difficult for even the most experienced investors, having a price range in mind gives you a solid enough target. Once you've reached that point, consider selling it and enjoy the gains.

Why does Apple hold so much cash? ›

Any excess cash is better used in different ways. In the case of Apple, it's investment in securities. These investments allow Apple to hedge against currency-related risks, and receive some revenue to keep up with inflation.

Apple Cash is a digital card in Wallet that lets you send and receive money in Messages or Wallet. The money you receive appears on your Apple Cash card in Wallet.

Apple Cash balance limit

The maximum Apple Cash balance you're allowed to have after verifying your identity is $20,000. If you're part of Apple Cash Family, the maximum Apple Cash balance you're allowed to have is $4,000.

This is because, buying stocks is in effect taking an ownership stake in a company, and as the company grows and becomes more profitable, the value of your investment can increase. Cash, on the other hand, is a low-risk asset with little to no potential for growth and merely pays out interest to investors.

A common-sense strategy may be to allocate no less than 5% of your portfolio to cash, and many prudent professionals may prefer to keep between 10% and 20% on hand. Evidence indicates that the maximum risk/return trade-off occurs somewhere around this level of cash allocation.

Most financial experts end up suggesting you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000.