Stock-Based Compensation
Stock-Based Compensation refers to payments made to employees, executives or stakeholders using the company’s equity.
On the Income Statement, it is recorded as an operating expense.
On the Balance Sheet, Stock-Based Compensation increases Additional Paid-In Capital (APIC) when the stock awards are granted and vested.
On the Cash Flow Statement, it is added back to Net Income in Operating Activities because it is a non-cash expense.
In the room
SBC is a genuine debate in the market, which makes it a good signal of sophistication. It's added back as a non-cash expense, but it dilutes shareholders — saying that out loud shows you can hold both sides of an argument.