For Performance Contracts to Be Successful

question 3

Multiple Choice

For performance contracts to be successful:

• A) workers should be able to unduly in?uence the measure.
• B) workers must be willing to receive greater reward for greater risk.
• C) worker performance is focused on a single objective.
• D) there needn't be a strong link between worker effort and the performance measure.

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Definitions:

Dividend Payout Ratio

A financial metric that measures the percentage of a company's earnings paid out to shareholders as dividends, indicating how much money a company returns to shareholders versus how much it keeps to reinvest.

Gross Margin Percentage

A profitability metric calculated as gross margin (sales minus cost of goods sold) divided by sales, expressed as a percentage.

Net Profit Margin Percentage

A financial metric that shows what percentage of a company's revenue remains as profit after all expenses are deducted.

Book Value per Share

The equity available to shareholders divided by the number of outstanding shares.