Definition:

Net Cash Per Share is a financial metric that measures the amount of cash a company has on hand, net of its total debt, on a per-share basis. It provides insight into the company's liquidity and financial health.

Formula:

Net Cash Per Share = (Cash and Cash Equivalents - Total Debt) / Total Outstanding Shares

How to use the metric:

Investors and analysts use Net Cash Per Share to assess a company's liquidity position and its ability to cover its debts with available cash. A higher value indicates a stronger financial position, suggesting that the company has more cash available relative to its debt obligations.

Limitations:

Net Cash Per Share does not account for other liabilities or future cash flow needs. It also does not consider the company's operational performance or profitability. Additionally, it may not be a reliable metric for companies with significant non-cash assets or those in capital-intensive industries.

Applies to:

This metric works best in industries where cash flow and liquidity are critical, such as technology, pharmaceuticals, and other sectors with high research and development costs.

Doesn't apply to:

Net Cash Per Share may not be as relevant for industries with substantial fixed assets and capital expenditures, such as utilities or manufacturing, where cash reserves might be lower due to ongoing investments in infrastructure and equipment.

Summary:

Net Cash Per Share is a useful metric for evaluating a company's liquidity and financial health by examining its cash position relative to debt on a per-share basis. While it provides valuable insights into a company's ability to meet its debt obligations, it should be used in conjunction with other financial metrics to gain a comprehensive understanding of the company's overall financial performance.