What Is the Effect of the Exercise of Stock Options

question 38

Multiple Choice

What is the effect of the exercise of stock options?

• A)They generate cash to the issuing firm and therefore increase profit per share.
• B)They are an expense at the time of exercise.This lowers net income.
• C)They increase debt and lower borrowing capacity but have no effect on profit.
• D)They increase the number of shares outstanding.
• E)They have no immediate effect on profitability.

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Definitions:

Acquisition

The process by which one company purchases most or all of another company's shares to gain control of that company.

Business Efficiency

Describes the effectiveness with which a company or organization uses its resources to produce goods or services and achieve its objectives with minimal waste.

Competition

The rivalry among businesses to attract customers, increase sales, and gain market share.

Tying Arrangement

A business practice where the sale of one product is conditioned on the purchase of another, often scrutinized for anti-competitive effects.