Some Managers Argue That Since Employee Stock Options Are Usually

question 130

Multiple Choice

Some managers argue that since employee stock options are usually issued at an exercise price that is less than or equal to market value when they are granted, they have no value. However, generally accepted accounting principles require that they be recorded as compensation expense. The primary reason for this is:

• A) To achieve proper matching.
• B) The time value in the options creates economic value.
• C) The entity must use employee stock options in order to compete for talent.
• D) They are accepted by employees as compensation.

---

Definitions:

Economical

Characterized by efficiency and avoidance of waste, in terms of both cost and resources.

Successful MRP Use

Refers to the effective application of Material Requirements Planning, a system for planning production and inventory control, to ensure timely availability of materials while minimizing inventory costs.

Materials Plan

A comprehensive strategy for managing the procurement, storage, and use of materials needed in the manufacturing process.

Record Integrity

Ensuring that records are accurate, consistent, and maintained in such a way that their completeness and original state are preserved over time.