How to Calculate Operating Cash Flow Per Share
Original post by Bryan Keythman of Demand Media
Operating cash flow is the cash a company generates from its normal business operations that it can reinvest in its business or distribute to shareholders. You can calculate a company's operating cash flow per share of common stock to gauge its performance. A company that generates higher operating cash flow per share creates more value for shareholders.
Find the first section of a company's cash flow statement, called the Cash Flow from Operating Activities section. You can find a public company's financial statements in its 10-Q quarterly reports and its 10-K annual reports, which you can obtain for free from the U.S. Securities and Exchange Commission's online EDGAR database.
Identify the amount of net cash flow from operating activities at the bottom of the section, which is the company's operating cash flow. For example, assume a company's cash flow statement shows $1 million in net cash flow from operating activities.
Find the last section of a company's balance sheet, which is called the Stockholders' Equity section.
Find the line item called Common Stock in the section. Identify the number of shares outstanding, which is listed in the line item's description. In this example, assume the company has 1 million shares outstanding.
Divide the company's net cash flow from operating activities by the number of shares outstanding to calculate its operating cash flow per share. In this example, divide $1 million in net cash flow from operating activities by 1 million in shares outstanding to get $1 in operating cash flow per share.
Tips & Warnings
- Calculate a stock's operating cash flow per share over different accounting periods to monitor changes.
- Compare a stock's cash flow per share with that of others in its industry.
- Morningstar: Cash Flow from Operations
- Morningstar: Cash Flows from Operating Activities
- CliffsNotes: The Balance Sheet: Stockholders' Equity
- Brigham Young University, Marriott School: Personal Finance: Know Why Stocks Fluctuate in Value
About the Author
Bryan Keythman has performed stock investment research and writing for a consulting firm since 2008. He also has prior experience sourcing and underwriting commercial real-estate investment and development opportunities for a commercial real-estate developer. Keythman holds a Bachelor of Science in finance.