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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: Timothy Liu who wrote (98504)8/22/2002 2:07:50 PM
From: Steve Lee  Read Replies (2) of 99280
 
"The earning does not suddenly become negative because of the option."

If the company gives away shares at a discount (through options) and that discount is greater than the reported earnings then the company has actually made a loss. It is not accounted for by dilution.

It is a loss IMO cos the discounted stock (options) are an employment expense. If you don't provide the discounted stock, you have to pay the employees more or they will leave. So EPS that doesn't account for discounted stock, is not a true reflection of all costs of running the business.
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