Cash flow can be regarded as the volume of cash, generated by the trading operations of the business out of which the ordinary dividend must be funded.Cash flow per share = Cash flow (£)/weighted average no. shares in issue.
Where:
Cash flow = Net cash inflow from operating activities + returns on investment - Servicing of financing – taxation.
And:
Operating profit = Depreciation charges + asset write downs + net increase in provisions - share of associates profits (net) - profits (net of losses) on asset disposals - currency translation profits (net) - net increase in stocks - net increase in debtors + net increase in creditors.
And:
Returns on investments = interest received + dividends received from associates + other investment receipts.
And:
Servicing of finance (except dividends paid to ordinary shareholders) = interest paid - dividends paid to preference shareholders - dividends paid to minority prefs.
