I dont' get it. What is the difference between what a company is worth and what it will be worth in the future? I thought the difference was discounting. Why wouldn't the curent worth be equal to the present value of its future worth?
Actually the Dow is affected by more than 1 for each dollar a component falls. The dow would fall by $75/0.2. The divisor is.2 rather than 30 because of all the stock splits since 1928.
Its hard to manuplate the Dow based on the choice of firms you put in. The Dow is calculated by adding the prices of 30 stocks and dividing by a 'divisor.' The divisor would be 30 (because there are 30 stocks) but they adjust it to make sure the average doesn't change from day to day due to stock splits and changes in the Dow makup.
The firms don't change very often. There have only been about 48 differnent firms in the Dow since 1928. Some of the firms left because they went bankrupt (John's Manville) and some just became irrelevant (Woolworths). Everyone is warned before the stocks change and the change doens't retroactively effect the average.
The reason these options are so valuable is because the assets are growing in value.
I'm just trying to say that one should apply the same accounting rules for liabilities and assets. Analysts adjust the accounting numbers all the time. However, if the analyst is going to adjust the liabilities because the assets are more valuable then he should adjust the value of the assets in the same way. The revenue and expense fall out of how you record the change in the value of the assets and liabilites.
Microsoft's accounting is not very good, but at least they don't use mark to market accounting for one side of the balance sheet and not the other.
I am an accounting professor and I teach employee stock options to my financial reporting class. This arguement is silly. Although Microsoft's employee stock options have a value of about $65 billion (# options outstanding * (stock price - strike price))the accounting this guy is proposing doesn't make any sence. If Microsoft was going to account for the increase in the value of the employee stock option liability as an expense then they would also have to account for the increase in the value of their assets as revenue. That is mark to market accounting. If Microsoft accounted for things this way then it's net income would be the change in the market value of the firm over the year or about $200 Billion. Not -$10 billion.
This guy has no evidence for the stock market being fooled by footnote disclosure. Lots of people belive that to be true but there isn't any scientific evidence. At leat as scientific as The Accounting Review, The Jurnal of Accounting Research, and The Journal of Accounting and Economics get.
I think Microsoft has beat expectations every quarter for 10 years. There is actually another way to beat analysts forecasts. Microsoft manages the forecast by talking down expectations. You can calculate the true sales for microsoft by taking the reported revenue and adding the change in deferred revenue. The true sales are about 10% higher than the reported sales. If they stopped recording unearned revenue then they would have reported sales of 6 billion even if they never sold another unit of NT, office etc.
Microsoft uses unearned revenue to smooth income. Basicly the reported revenue (sales) on Microsoft's income statement is a weighted average of the sales over the past 18 months. Each year Microsoft recognizes most of the money they get for selling office etc. but puts the rest on the balance sheet as a liability (unearned revenue). Then over the next 18 months, they take the liability off the balance sheet and recognize the revenue. The reason the number on the balance sheet is smaller now (this unearned revenue) is that Microsoft reduced the % of revenue that was postponed. I think this change is a respones to the the SEC investingating Microsoft for "cookie jar reserve accounting." At the end of the year the reserves were $6 billion and I doubt that this indicates that Microsofts sales are falling.
He didn't maniuplate the market. He sold stock, pushing the price down. Someone bought it an is better off than they would have been if they had bought the stock at a higher price. Lawyers sue firms every time the stock price falls and if there is any evidence that an insider didn't lose as much as he could have all the better for the jury. Yes he paid tax.
The people who were willing to buy at the higher price lost because the firm didn't disclose that it was going to have a loss not because this guy sold stock. When you sell that much stock you push the stock price down, helping the people who were willing to buy the stock. That is they got the stock for a lower price because this guy sold.
You may be right, but one thing to know is that wall street has already been notified that Corel is betting on Linux. At 5 25/32 (NYSE closing price) Corel's stock price is 3 X higher than its 52 week low of 1 9/16.
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I dont' get it. What is the difference between what a company is worth and what it will be worth in the future? I thought the difference was discounting. Why wouldn't the curent worth be equal to the present value of its future worth?
Actually the Dow is affected by more than 1 for each dollar a component falls. The dow would fall by $75/0.2. The divisor is .2 rather than 30 because of all the stock splits since 1928.
Its hard to manuplate the Dow based on the choice of firms you put in. The Dow is calculated by adding the prices of 30 stocks and dividing by a 'divisor.' The divisor would be 30 (because there are 30 stocks) but they adjust it to make sure the average doesn't change from day to day due to stock splits and changes in the Dow makup.
The firms don't change very often. There have only been about 48 differnent firms in the Dow since 1928. Some of the firms left because they went bankrupt (John's Manville) and some just became irrelevant (Woolworths). Everyone is warned before the stocks change and the change doens't retroactively effect the average.
The reason these options are so valuable is because the assets are growing in value.
I'm just trying to say that one should apply the same accounting rules for liabilities and assets.
Analysts adjust the accounting numbers all the time. However, if the analyst is going to adjust the liabilities because the assets are more valuable then he should adjust the value of the assets in the same way. The revenue and expense fall out of how you record the change in the value of the assets and liabilites.
Microsoft's accounting is not very good, but at least they don't use mark to market accounting for one side of the balance sheet and not the other.
PS I'm pretty sure I'm an accounting professor.
I am an accounting professor and I teach employee stock options to my financial reporting class. This arguement is silly. Although Microsoft's employee stock options have a value of about $65 billion (# options outstanding * (stock price - strike price))the accounting this guy is proposing doesn't make any sence. If Microsoft was going to account for the increase in the value of the employee stock option liability as an expense then they would also have to account for the increase in the value of their assets as revenue. That is mark to market accounting. If Microsoft accounted for things this way then it's net income would be the change in the market value of the firm over the year or about $200 Billion. Not -$10 billion.
This guy has no evidence for the stock market being fooled by footnote disclosure. Lots of people belive that to be true but there isn't any scientific evidence. At leat as scientific as The Accounting Review, The Jurnal of Accounting Research, and The Journal of Accounting and Economics get.
I think Microsoft has beat expectations every quarter for 10 years. There is actually another way to beat analysts forecasts. Microsoft manages the forecast by talking down expectations. You can calculate the true sales for microsoft by taking the reported revenue and adding the change in deferred revenue. The true sales are about 10% higher than the reported sales. If they stopped recording unearned revenue then they would have reported sales of 6 billion even if they never sold another unit of NT, office etc.
Microsoft uses unearned revenue to smooth income. Basicly the reported revenue (sales) on Microsoft's income statement is a weighted average of the sales over the past 18 months. Each year Microsoft recognizes most of the money they get for selling office etc. but puts the rest on the balance sheet as a liability (unearned revenue). Then over the next 18 months, they take the liability off the balance sheet and recognize the revenue. The reason the number on the balance sheet is smaller now (this unearned revenue) is that Microsoft reduced the % of revenue that was postponed. I think this change is a respones to the the SEC investingating Microsoft for "cookie jar reserve accounting." At the end of the year the reserves were $6 billion and I doubt that this indicates that Microsofts sales are falling.
He was going to sell either before or after the announcement. so the same number of shares is outstanding.
He didn't maniuplate the market. He sold stock, pushing the price down. Someone bought it an is better off than they would have been if they had bought the stock at a higher price. Lawyers sue firms every time the stock price falls and if there is any evidence that an insider didn't lose as much as he could have all the better for the jury. Yes he paid tax.
The people who were willing to buy at the higher price lost because the firm didn't disclose that it was going to have a loss not because this guy sold stock. When you sell that much stock you push the stock price down, helping the people who were willing to buy the stock. That is they got the stock for a lower price because this guy sold.
You may be right, but one thing to know is that wall street has already been notified that Corel is betting on Linux. At 5 25/32 (NYSE closing price) Corel's stock price is 3 X higher than its 52 week low of 1 9/16.