Earnings per share, or EPS, is an important consideration when it comes to assessing a company. EPS reflects how much profit the company has generated in a particular year on a per-share basis. Comparing a company's EPS growth with that of other companies is quite common for investors. Besides, EPS is used as a denominator for the famous P/E ratio. Unfortunately, many investors confuse profits with actual cash earned by companies, which is not always right. To illustrate this point, consider Tata Motors. In FY22, it posted a strong EBITDA (earnings before interest, tax, depreciation, and amortization) of ₹27,774 crore but on the net level, it posted a loss of ₹11,442 crore! What caused this huge change in its numbers? It was because of non-cash expenses called depreciation.
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What is depreciation? 
Companies spend huge sums of money whenever they buy any new properties or machinery and the amount is paid off right away. But the accounting method does not allow recording this as an expense entirely in the very first year. Instead, the method allocates the cost over the years, mostly based on the useful life of an asset. This is recorded as 'depreciation' in the income statement. As cash outflow is incurred at the beginning, depreciation essentially becomes a noncash expense. Capital-intensive industries often face the brunt of depreciation and sometimes, even the management may change the rate of depreciation to influence the profits.
How do we remove this non-cash effect and make it easy for comparison? 
To remove the effect of depreciation, all we have to do is to add this non-cash expense back to profits to arrive at cash EPS. Here is the formula you can use to calculate the cash EPS:
Cash EPS = (Net profit + Depreciation) / Number of shares outstanding&nbsp;
You can find net profit and depreciation in the income statement and for the number of shares, you can simply divide the net profit by the actual EPS given. The following table presents a list of the top 20 companies with huge differences between their EPS and cash EPS.

Not the real earnings 

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