Not a very real world scenario.
True, but I susect my larger point is that we may have a lot of free cash flow out there that is funded by financing activities rather than operations, and perhaps this free cash flow, if it is intended to be representative of "the residual left over for the common shareholder after the enterprise has replenished any 'wasting' assets (PP&E, intellectual property, etc.) necessary to more or less sustain its productive capacity to generate cash flow", then it needs to be modified in some manner so we are not comparing apples to oranges when comparing the free cash flow in these companies with the free cash flow in other companies who may not issue stock options to pay their employees.
This distinction would be especially important to me if I were a buyer of the entire enterprise, because then all of the arguments about whether the differences are picked up in per share calculations or dilution, would be moot. As a buyer of the entire enterprise, I would only be interested in absolute amounts of net income and free cash flow and accordingly, company T, that pays all of its employee obligations in cash and generates "X" cash flow, would be worth a lot more money to me than company R, which generates the same cash flow, "X", but pays half of its employees compensation obligations by issuing stock options.
Where do absolute amounts of free cash flow reflect this problem and this seeming difference in free cash flow quality?
Best, Huey |
