Hey guys I was reading over some company filings as earnings season is in effect and I had an accounting question.
Free cash flow is typically found by just taking the operating cash flow and subtracting the general expenses (CAPEX) following all operation activity. However, stock based compensation gets included into operating cash flow activities and therefore adds to the free cash flow total.
This led me to wonder if I should subtract the stock based compensation from the total cash flow as stock based compensation is actually just a non-cash expense of the business and does dilute existing shareholders. This is shockingly significant however as many newer and mostly tech companies generate ridiculous amounts of there cash flow from stock based compensation which is extremely deceptive (ex. ADSK, TEAM, PLTR, NVDA).
This led me to ask if it makes sense to subtract stock based compensation from cash flow , include it in cash flow, or something else.
What do you guys think?
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