Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (5625)	7/25/2000 12:25:47 PM
From: IceShark	Read Replies (1) \| Respond to of 436258

hey, this is a closed issue as far as I am concerned, and you are wrong, so leave me out of it. -g-

To: Ilaine who wrote (5625)	7/25/2000 12:50:31 PM
From: LLCF	Respond to of 436258

<The options are the right to buy stock later if the employee still works there. It's in lieu of pay, and it's also an incentive to stick around and make the company grow.> Or the option to buy stock now, or buy stock whether or not the person still works there... it all depends on the option. < They decide they need a manager, so they hire Jill, and since they need the cash for operating expenses they give her 1/6 of the stock. What did she get? Was it cash?> She got compensated for coming aboard for a period of time [I assume she gets a salary eventually]. Pretty straight forward. <When a corporation gives an employee actual shares of stock, it is giving the employee a share of the company. It's in lieu of salary.> Yes, she's getting compensated in both cases. The whole point is that not taking this into account as an expense of doing business throws off all other accounts in analyzing the company. So a financial analyst must rework ALL the financial ratios, 'margins' for instance will be overestimated because reported salary expense will be way under the real number, and therefore expenses will be higher than what's reported. The amount and importance of these errors depends apon the company. In your example above I would submit it's meaningless because anyone buying in would know that everything hinges on their new product... the analysis is: 'do we have enough money to make the idea fly, and will the product fly' - that outcome dwarfs all other factors. With a large company where the granting of options has become institutionalized, any analyist worth his salt should take these expenses into account. There is no free lunch... if you give someone something for working for you, you may as well admit what the person costs you! DAK