I saw a few cases for stocks where the cash flow per share was more than earning per share of the stock. But couldn't understand the reason behind it


3 Answers 3


There could be several reasons, and it depends on whether you're looking at total cash flow or operating cash flow. Two very common reasons for cash flow being larger than earnings are:

  • If a company sells stock or borrows money, that is positive cash flow but is not income
  • If a company has large expenses that do not mean cash out of the company (like depreciation) that is a reduction of earnings but not cash flow

Cash flow is not the same as earnings, based on accounting rules that attempt to provide a more accurate and stable picture of a company's operations. What makes them different?

(A) Sometimes cash purchases are not considered expenses [like if a company buys a building, that isn't an 'expense' on the income statement, instead it is an increase to assets on the balance sheet], so cashflow is often less than earnings.

(B) Some times expenses are not cash-based. A common examples would be depreciation of fixed assets [like buildings, which weren't expensed originally, but are taken as expenses over time {to reflect that the building wears down over time}].

If A < B, then cashflow will be higher than earnings.

  • I didn't understand this well.
    – rookie
    Nov 26, 2021 at 16:57
  • @Suchi Are you trying to use an understanding of these terms to decide how to invest? If you are, I think you might be well in over your head; be very careful not to invest in something you don't understand. Nov 26, 2021 at 16:59
  • No, I just wanted to understand when that happens, for my knowledge
    – rookie
    Nov 26, 2021 at 17:10
  • Earnings of a company and cashflow of a company are different thing. So earnings / shares is different than cashflow / shares. Nov 26, 2021 at 17:12
  • so earnings is basically related to market sentiments, and cash flow per share is the money behind one share that the company is earning
    – rookie
    Nov 26, 2021 at 17:15

Think of your own personal cash flow. You have assets other than cash, so your change in wealth (net income/earnings) is not just "cash in minus cash out".

When you buy a car, a house, or a stock, you lose cash but gain another asset, so you haven't suddenly lost the amount you paid. When those assets change in value, your wealth changes without a corresponding cash flow.

When you pay off debt, you eliminate a liability, so again the cash you paid isn't simply lost.

Your cash flows that do directly affect your wealth are things like salary, rent, and food, which are paid to/by you in maintaining your daily life, and don't correspond to offsetting assets.

Companies are similar.

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