easy · Investment Banking
SaaSCo recognizes 25 million of stock-based compensation (SBC) as an operating expense.
How does this appear on the cash flow statement?
- It is an outflow in the investing section, treated as a purchase of human capital.
- It is subtracted from net income in the operating section because it reduces total equity.
- It is treated as a financing outflow because it economically represents an equity issuance to staff.
- It is added back to net income in the operating section because it is a non-cash expense.
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