What is Cash Per Share
Cash per share represents a company's total cash divided by its number of shares outstanding. Cash per share is the percentage of a firm's share price that is immediately accessible for spending on activities such as research and development, mergers and acquisitions, purchasing assets, paying down debt, buying back shares and making dividend payments to shareholders. Cash per share consists of cash and short-term investments. It is money that a firm has on hand; it does not come from borrowing or financing activities.
BREAKING DOWN Cash Per Share
When a firm has high levels of cash per share, it is holding a significant percentage of its assets in a very liquid form. This decision can indicate economic uncertainty and an unwillingness by firms to invest given the current economic climate. High levels of cash per share can indicate that a firm is performing well, with positive earnings and cash flow and the ability to reinvest in itself; however, high levels of cash per share do not always coincide with overall financial strength. Rather, available cash offers a level of financial flexibility, but can also represent a cost of capital inefficiency if a company holds onto too much cash. For instance, Apple Inc., the popular technology company is regularly subject to criticism for it stockpiling cash which sits idle. In theory, Apple's shareholders could earn a higher rate of return on the idle cash if Apple returned excess cash to its capital sources.
Cash per share can be further broken down into different segments of cash or cash available to various forms of capital (financing). Free Cash Flow (FCF) is a common cash flow measure highlighting available cash after operations which can be distributed to pay down debt or returned to common equity shareholders. Another common cash flow metric is Free Cash Flow to Equity (FCFE), which is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt are paid.