Free Cash Flow Per Share
What Is Free Cash Flow Per Share
Free cash flow per share (FCF) is a measure of a company's financial flexibility not entirely settled by partitioning free cash flow by the total number of shares outstanding. This measure fills in as a proxy for measuring changes in earnings per share.
Preferably, a business will produce more cash flow than is required for operational expenses and capital expenditures. At the point when they do, the free cash flow per share metric below will increase, as the numerator develops holding shares outstanding consistent. Expanding free cash flow to outstanding shares value is a positive, as a company is viewed as further developing possibilities and more financial and operational flexibility.
Free cash flow per share is additionally called: Free cash flow for [to] the firm. In this case, it is recorded as FCFF. The selection of a name is much of the time a question of preference. It is exceptionally considered normal to see it portrays as FCF in the paper and FCFF in an analyst research note, despite the fact that they're addressing a similar value.
Calculated as:
BREAKING DOWN Free Cash Flow Per Share
This measure flags a company's ability to pay debt, pay dividends, buy back stock and work with the growth of the business. Likewise, the free cash flow per share can be utilized to give a preliminary prediction concerning future share prices. For instance, when a firm's share price is low and free cash flow is on the rise, the chances are great that earnings and share value will before long be on the up in light of the fact that a high cash flow for each share value means that earnings per share ought to possibly be high too.
Of the famous financial condition ratios, Free Cash Flow per Share is the most far reaching, as it's the cash flow accessible to be distributed to both debt and equity shareholders. An alternative however comparative ratio is Free Cash Flow to Equity (FCFE). Free cash flow to equity starts with free cash flow to the firm, however strips out interest expenses on debt-related instruments, as they're senior in the capital structure. This leaves the free cash flow accessible to equity shareholders, who are at the lower part of the capital structure.
One more key element of free cash flow measures is the exclusion of non-cash related things found on income and cash flow statements. Essentially, depreciation and amortization. Despite the fact that depreciation is reported for tax and different purposes, it is a non-cash thing. Furthermore, free cash flow measures are just interested in cash related things.
