Which of the Following Statements About Employee Stock Options Is

question 76

Multiple Choice

Which of the following statements about employee stock options is true?

• A)The options are usually out-of-the money when issued.
• B)The options are usually out-of-the money when exercised.
• C)An out-of-the money option has no value.
• D)When options are exercised, the value of existing shareholders' shares is diluted.

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Definitions:

Factory Burden

Another term for manufacturing overhead, encompassing all indirect costs involved in operating a factory, excluding direct materials and labor costs.

Surplus

The amount by which a company's income exceeds its spending, or in a broader sense, an excess of assets over liabilities.

Conversion Costs

The combined costs of direct labor and manufacturing overhead incurred to convert raw materials into finished products.

Direct Labor Cost

The total cost of all the labor directly involved in the production of goods or services, excluding indirect expenses such as supervisor salaries and utilities.