Cash Per Share

Posted in Finance, Accounting and Economics Terms, Total Reads: 345
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Definition: Cash Per Share

It is a financial ratio that is estimated by dividing the total cash of the company by the number of shares outstanding. Total Cash comprises of cash as well as short-term investments.

 


Description:

Cash per Share ratio is used by investors and analysts to estimate the liquidity position of a company. Cash and short-term investments, put together, indicate how much liquidity the firm has on paper and how well it can meet any sudden debt obligations or other claims.

 

A “cash per share” ratio that is higher than the stock price of the company is usually considered a bargain for buying.

 

Example:

Companies belonging to the same industry can highly vary in their cash per share ratios. For example, in the technology sector, Google has a very high cash per share value of $85.42, but Yahoo maintains a very low cash per share ratio of $4.28 (data as on 25th October 2014).

Company

Cash per Share ($)

Google

85.42

Microsoft

10.31

Amazon

17.28

Facebook

5.37

Yahoo

4.28


Positives and Negatives: 

A cash per share ratio that is too low indicates bad liquidity position of a company and so is not viewed favorably. On the other hand, a cash per share ratio that is very high indicates the company’s unwillingness to invest the cash (in assets or in M&As) or to give it back to shareholders in the form of dividends. Any company that sits pretty on cash without declaring dividends or putting it to use for growth is also not viewed favorably.

 

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