How Do You Calculate Price-To-Cashflow Ratio In The Stock Market?
The stock market has historically been a wise investment. However, that does not mean that each potential investment carries the same risk and reward. An investor needs measurement tools in order to invest wisely in the stock market. One such tool is the price to cash flow ratio. Determine the cash flow per share of the publicly traded company. To calculate cash flow per share, take Operating cash flow of a company and subtract preferred dividends. Obtain the operating cash flow of a corporation. The calculation for operating cash flow is as follows: EBIT (Earnings before Income Taxes) plus depreciation minus Taxes. Operating cash flow is a measure of the cash generated by a company. Calculate the Cash flow per share figure of the corporation. Take the operating cash flow established in the previous step, subtract preferred dividends and then divide the number by common shares outstanding. The preferred dividends and common shares outstanding figure are available on any company website
