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Politics : Ask Michael Burke
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To: Mama Bear who wrote (83014)8/16/2000 3:18:17 AM
From: Bilow  Read Replies (1) of 132070
 
Hi Mama Bear; But the sage of Nebraska is right. Options are an expense, and need to show up on the earnings line. Companies simply cannot offer things of value (such as partnerships or earnings shares) without counting it as a cost of doing business.

With publicly traded companies, there are ways of estimating the value of options based on volatility &c. These are the way things should be done. The calculations are made at the time the options are granted, not at the time they are exercised. This means that the business does not treat them as a debt that goes up or down in value with the stock price, but as an offer of a percent of ownership.

Could it be that the real problem you have with the concept is the nebulous technique for determining the value of the option at the time of grant?

-- Carl
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