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Pastimes : Austrian Economics, a lens on everyday reality
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To: Don Lloyd who wrote (172)3/17/2003 11:05:04 AM
From: TimF  Read Replies (1) of 445
 
Second, it is easy to demonstrate that the proper calculation of EPS must include the cost of options granted in the numerator, as well as the increase in number of shares in the denominator.

I disagree.

Imagine two companies company X and company Y. They both have the same revenue, and the same costs including the same number of employees who are compensated with options or cash with the same value, but company X gives its employees cash and company Y gives options.

I can see the arguments that their EPS should be the same. And under the current system they are not. But if you count the options as if they where cash EPS will also not be the same. Company X will have higher EPS (instead of the current situation where company Y has higher).

Tim
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