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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Kirk © who wrote (4447)	4/12/1999 12:13:00 PM
From: Sun Tzu	Read Replies (2) \| Respond to of 15132

>>...what really matters to shareholders at the end of the day is how much operating profit there is I am afraid this is not the case (or at least should not be). One of the biggest shenanigans of the recent bull market is the stock promoters' push to look only at operating income rather than actual income. Any time you are faced with such slight of hands, there is an easy way to bring them to light: do as you did in you basic calculus or functions course <g> evaluate the process at zero at infinity and at minus infinity. Doing this, it will be clear that a company can enormously inflate its operating profits by not paying its staff in cash and rather grant them options. Does that creat shareholder value? Of course not. Look at it this way, what if all Microsoft employees all agreed to work for $10k + 2000 stock options per year. The operating income would shoot to the moon, but the fact would remain that each staff was paid over $200k a year. You just would not see it right away. Then the company can announce that they are doing stock buy back (and the stock would rise due to the announcement), but in reality all the are doing is to get the IOUs that they gave their employees (i.e. the options) and pay them for it. Am I making sense now? Sun Tzu