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Strategies & Market Trends : Gorilla and King Portfolio candidates - Moderated
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To: tinkershaw who wrote (728)2/20/2004 7:40:31 AM
From: Mike Buckley  Read Replies (1) of 2955
 
Tinker,

If all your free cash flow is spent buying back stock to compensate for stock options, then you have $0 free cash flow as it is essentially the cost of employing labor.

For the same reason you wouldn't track earnings without tracking earnings per share, you wouldn't track free cash flow without tracking free cash flow per share. Naturally, you would use diluted shares to fully account for options that are in the money. You could also track options that are not in the money to determine risk of future dilution.

--Mike Buckley
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