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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (30676)	2/17/2002 10:29:25 PM
From: Win-Lose-Draw	Respond to of 99280

I have no problem with it not hitting the income statement. My problem is that I am completely bewildered how something that doesn't hit the income statement is a tax deduction. That part I just don't get. I mean, how can you claim an expense you just finished claiming wasn't an expense?

To: orkrious who wrote (30676)	2/18/2002 7:44:38 AM
From: Boca_PETE	Read Replies (2) \| Respond to of 99280

orkrious: I agree that "The truth is is that stock options compensate employees" I agree that stock options "dilute existing shareholders". I disagree that dilution occurs "without hitting the income statement." - While the theoretical stock option expense amount computed using the Black Scholes Model is not reflected in the absolute amount of reported net income (because it is paid directly to the employee by shareholders), per share net income IS REDUECED BY the cumulative dilutive effect of additional shares issued in connection with options exercised. Moreover, the diluted earnings per share each period adds the dilutive impact of all in-the-money outstanding stock options (even those which are not exercisable). So the dilution from stock options IS REFLECTED ON THE INCOME STATEMENT as additional average shares and a reduction of per share net income. P