What would understate earnings for a company that uses stock options to compensate employees?

a. Over-estimate the volatility of the underlying (company) stock.

b. Under-estimate the life of stock options.

c. Under-estimate the volatility of the underlying (company) stock.

If a company consistently buys back shares to offset option creep, what type of adjustment to the statement of cashflows might an analyst make?

a. remove buyback from CFF and include in CFO

b. remove buyback from CFF and include in CFI

c. remove buyback from CFO and include in CFO