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To: hueyone who wrote (62833)	1/31/2003 8:45:25 AM
From: RetiredNow	Read Replies (1) \| Respond to of 77400

Hi hueyone, I disagree with "d. Net Cash Flow from Ops increased by tax savings" The reason is that net income will be decreased by let's say $100, but then increased by the tax shield of let's say $30. So the net net is actually a decrease of $70. That means, operating cash flows and retained earnings are both net lower by that amount. Basically, you have to look at both sides of the equation.

To: hueyone who wrote (62833)	1/31/2003 9:34:23 AM
From: rkral	Respond to of 77400

OT .. Huey, If a non-cash deduction for a stock grant is the reality, I agree 100% with your analysis. "non-cash deduction" <==> a tax deduction claimed, and allowed by the IRS, for a non-cash expense That balance sheet assets can increase by expensing stock options, versus not expensing them, is a concept I find perverse and revolting. Sure, you and I can gift stock to a charity .. and receive a non-cash deduction as a result. That's because our government has seen fit to promote charitable giving. It's a purpose most people agree with, .. and the tax incentive is effective IMHO. But does that translate to a corporation gifting stock to an employee? Is the employee a charity case? If a non-cash deduction for a stock grant is reality then, not only are existing stockholders bearing the cost of equity and EPS dilution, but taxpayers would be bearing a cost as well. Why is that? While not exactly true, assume the tax amounts for the employee and corporation are exactly the same. (This assumption is in the ballpark, at least, given the statutory corporate tax rate of 34%.) The *employee would pay $X in taxes, Y% of the stock grant value, to Uncle Sam. But Uncle Sam would also be allowing the corporation to not pay $X in taxes* on income, by way of the deduction for a non-cash expense. So what would be the net tax amount Uncle Sam realized on the income the employee inarguably received? You're right! Zip! Nada! And if "net net", the taxes paid by the employee don't stay in Uncle Sam's pockets, who do you suppose makes up the difference? You're right again! You and me, of course. So I hope you're wrong about the non-cash deduction for a stock grant. Examining a 10-K could tell us. Do you, or does anyone, know of a company that uses *only stock grants and cash* to compensate employees? Ron

To: hueyone who wrote (62833)	1/31/2003 10:13:41 AM
From: rkral	Read Replies (1) \| Respond to of 77400

OT .. Huey, you wrote "reduced by the stock grant less tax savings" several times. Using a mathematical presentation, IMHO you mean "minus ("stock grant" minus "tax savings")". That "minus .. minus", meaning "plus tax savings", is going to confuse a few readers. OTOH, maybe that's not what you meant. Ron