The cash that is really left over
Reported profit involves judgement calls: how quickly to write down equipment, when to record a sale, how to treat a disputed cost. Cash involves none. Either it arrived in the bank or it did not.
Free cash flow takes the cash generated by day-to-day operations and subtracts what the company had to spend on equipment, property and technology to keep going. Divide the remainder across every share, and you have the cash standing behind your single share after the business has paid for its own upkeep.
Apple, worked out
Apple recently produced around $110 billion of operating cash flow and spent roughly $11 billion on property and equipment. Free cash flow is therefore about $99 billion. Across approximately 15.2 billion shares, that is 99,000,000,000 divided by 15,200,000,000, or roughly $6.51 per share.
Set that beside the earnings per share figure of about $6.38 from the same period. The two are close, and closeness is the reassuring outcome: it says reported profit is genuinely turning into cash rather than existing mainly on paper.
Rounded recent approximations, used to demonstrate the method.
Why cash and profit drift apart
A company can report healthy profit while its cash flow tells an unhappier story. The usual culprits are customers who have not paid yet and inventory piling up in warehouses. Both count towards profit long before the cash appears, and a business growing fast can run short of cash while looking profitable.
The habit worth forming is comparing free cash flow per share with earnings per share across several years. When cash consistently trails profit by a wide margin, something in the working capital deserves a closer look before you invest.
How this number gets starved
Here is the manipulation to watch for. Free cash flow rises when spending on equipment falls, and management controls that spending. A company can cut investment sharply for a year or two, report handsome free cash flow, and quietly hollow out the machinery its future depends on.
The tell is spending on property and equipment that drops well below the depreciation charge for several years running. That means assets are wearing out faster than they are being replaced. Cash looks strong today and the bill arrives later.
Where it fits in a Stax plan
Growth in free cash flow per share across five years is one of the more demanding filters a beginner can apply, and it tends to surface durable businesses because it is difficult to fake for long.
Turn it into a rule alongside a debt limit, then let Stax test the result over five or more years of real market prices. Every simulated trade fills at the next trading day’s open with fees deducted, and you can open any trade in the result to read which rule caused it.