SBC Add-Back
The line on the operating-activities section of the cash flow statement that reverses out stock-based compensation expense from net income. The mechanics are correct accounting: SBC reduced net income on the income statement, but no cash actually left the company, so the cash flow walk has to add it back to arrive at operating cash flow. The controversy is whether the add-back should remain in a Free Cash Flow calculation. The institutional consensus is that SBC is a real economic cost paid in shareholder dilution rather than cash, and a free-cash-flow figure that keeps the add-back in describes cash to ALL stakeholders rather than cash to EXISTING shareholders. The disciplined practice computes FCF both with and without the add-back and watches the gap.
Lessons that use this term
Related terms
Accounts Payable · Adjusted EBITDA · Adjusted EBITDA Ex-SBC · ADR · ARPU · Average Length Of Stay
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