Executive Stock Options Are One Way of Rewarding Executives

question 15

Multiple Choice

Executive stock options are one way of rewarding executives.Restricted stock units are another way.Cash payments are yet another way.Consider the following two statements:
(i) Restricted stock units become more attractive compared to stock options as stock price volatility
Increases.
(ii) Cash payments become more attractive compared to restricted stock units as stock price
Volatility increases.

• A)(i) is correct, (ii) is incorrect.
• B)(i) is incorrect, (ii) is correct.
• C)Both (i) and (ii) are correct.
• D)Both (i) and (ii) are incorrect.
• E)only (i) is correct, if we replace "more" with "less".

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Definitions:

Productive Capacity

Refers to the maximum output or productive ability of resources, facilities, or organizations, emphasizing efficiency and optimization.

Contribution Margin

The contribution margin is the difference between total sales revenue and total variable costs, indicating how much revenue contributes towards covering fixed costs and profit generation.

Underutilising

Refers to the scenario where resources are not being used to their full potential or capacity, often leading to inefficiency or wastage.

Variable Overhead Efficiency Variance

A metric used to measure the difference between the actual variable overhead cost and the standard cost of the actual production volume.