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Strategies & Market Trends : Good Investment Theses: VALUATIONS w/ FUNDAMENTAL ANALYSIS
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To: The Philosopher who wrote (77)4/24/1999 7:24:00 PM
From: Chuzzlewit  Read Replies (1) of 160
 
Chris, let me answer your points one at a time:

it's all very fine, Chuzzlewit, to talk about paying everybody in cash, but in the early days we didn't have any cash ...

I grudgingly conceded that point to Edwarda. But I shifted the argument to companies that are flush with cash -- outfits like MSFT.

WHY do you feel a need to include options in the face of the financial statements IF they are fully disclosed elsewhere, as they must be to get an auditor's okay? I don't consider that full disclosure. What we get is a listing of options, the exercise price and the time period for vesting. We also get fully diluted earnings which takes into account the additional number of shares (the denominator of eps) What we don't get is the cost. And most of all, what we don't get is the cost on the income statement. So we never see the effect on the numerator. That's not what I call full disclosure. If you read the Gretchen Morgenson piece that I used to kick this discussion off, you will see that several accounting firms are having a great deal of difficulty figuring out just how much these options actually cost shareholders.

In addition, there is the problem that you tend to reward the useless as well as the valuable Yes, this was a problem I intended to bring up later. The objection is that you reward people based on the performance of the stock, rather than their individual, measurable contributions against individual goals.

TTFN,
CTC

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