What Percent of a Start-Up Is Common as an Incentive

question 41

Multiple Choice

What percent of a start-up is common as an incentive to attract and reward a director?

• A) Less than 1 percent
• B) 2 to 5 percent
• C) 5 to 10 percent
• D) 10 to 15 percent
• E) Directors should not be given shares as an incentive

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Definitions:

Reinvested

Refers to the practice of using profits or dividends earned from an investment to purchase additional shares or units, thus compounding the investment's growth.

Cost of Capital

The minimum rate of return a company must earn on its investments to maintain its market value and attract funds.

Capital Rationing

The process of selecting the most profitable projects to invest in when funds are limited.

Capital Budgeting

Capital budgeting involves the process of deciding which long-term investments or projects a company should undertake, based on potential profitability and risk.