When the Owner of a Firm Sells "Recession Insurance" to Her

question 59

Multiple Choice

When the owner of a firm sells "recession insurance" to her employees, it means that the:

• A) employees sacrifice larger bonuses during good economic times in return for higher salaries during bad economic times.
• B) owner of the firm earns higher profits during bad economic times by skimming off the workers' salaries.
• C) employees are not allowed to quit the firm for higher pay during good economic times.
• D) employees are not allowed to quit the firm during bad economic times.

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Definitions:

Dividends

The portion of a company's earnings distributed to shareholders, usually in the form of cash or additional stock.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often receiving dividends before common shareholders.

Voting Privileges

Rights granted to shareholders to vote on company decisions, often proportional to the number of shares owned.

Organization Expenses

Costs associated with starting and organizing a business or company, which may include legal fees, registration fees, and promotional expenses.