Why Would a Firm Most Likely Offer Executive Stock Options

question 4

Multiple Choice

Why would a firm most likely offer executive stock options in a compensation package?

• A) to offer the executive long-term retirement security
• B) to provide the executive with guaranteed bonuses
• C) to encourage the executive to increase the firm's value
• D) to prevent the executive from negotiating with other firms

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Definitions:

Percentage Method

A way of calculating withholding taxes on an employee's pay by using percentages defined by tax tables based on the employee's earnings and filing status.

Federal Withholding

The process by which an employer deducts a portion of an employee's income and pays it directly to the government as an advance payment of the employee's tax liability.

FICA

Federal Insurance Contributions Act, the U.S. law that requires a payroll tax on both employees and employers to fund Social Security and Medicare.

FICA Taxes

Federal Insurance Contributions Act taxes, funding Social Security and Medicare, deducted from employee paychecks and matched by employers.