Accounting & the 3 Statements
Walk me through how stock-based compensation (SBC) of $100 affects the three statements (assume 25% tax, ignore window-dressing of EPS).
Model answer
Income statement: SBC is an operating expense → pre-tax income −$100; with a 25% tax shield (SBC is generally tax-deductible), net income falls $75. Cash flow statement: start at net income −$75,…
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