Employee stock purchase plans

Abstract

Whether an employee stock purchase or a thrift/savings plan is better for a company depends upon the situation and needs of that particular firm. When there is a high price/earnings ratio, rapid growth in earnings and asset requirements, and high interest rates on debt capital, a stock-purchase plan is apt to be more beneficial. A company which is growing more slowly, with a lower price/earnings ratio, may find a stock purchase plan disadvantageous in the dilution of future earnings per share and in a high level of cash flow stemming from the sale of equity. An analysis of the actual requirements of the company is necessary to a wise selection among the plan for employee benefits.