Diluted Normalized Earnings Per Share
Diluted Normalized Earnings Per Share (EPS) is calculated by dividing a company’s profit less its one-time earnings, by both outstanding common stock and its potential shares outstanding if all convertible securities or contingent securities were to be exercised. Diluted normalized EPS differs from regular earnings per share (EPS) in that it takes into account options. This increases dilution, by dividing normalized profit by a larger number shares.
What Is the Difference Between EBITDA and Operating Income?
Operating income measures a company’s profit after subtracting operating expenses, including outgoing general and administrative costs. Similar to EBITDA, operating income conveys how much profit (gross income) a company generates from its operations alone, without taking interest expenses or tax expenses into account.
Comparing EBITDA and Operating Income
EBITDA maybe calculated with the following formula:
EBITDA=Operating Income+Depreciation and Amortization
Free Cash Flow (FCF)
Free cash flow represents the cash a company generates after cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital.
Levered Free Cash Flow (LFCF)
Levered free cash flow (LFCF) is the amount of money a company has left remaining after paying all of its financial obligations. Levered free cash flow is important to both investors and company management, because it is the amount of cash that a company can use to pay dividends to shareholders and/or to make further investments in growing the company’s business. The amount of levered cash flow a company has can be negative even though operating cash flow is positive. This occurs when the amount of operating cash flow a company generates is insufficient to cover all of the financial obligations.
Levered free cash flow is calculated as Net Income (which already captures interest expense) + Depreciation + Amortization – change in net working capital – capital expenditures – mandatory debt payments.