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Scenario 6.1 in 2003, Managers at BabyBlooms Corp., a National Retailer of Retailer

question 49

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Scenario 6.1
In 2003, managers at BabyBlooms Corp., a national retailer of baby products, noticed that sales and profits were slumping.Store managers were instructed not to fill any vacant positions, which saved some money.However, by January, 2004, it was essential that BabyBlooms cut expenses further.The firm decided to offer incentives for top managers if they decided to leave before their tenure out of free will.Expenses still remained high, and in May, the firm asked store managers to reduce staff by laying off 10 percent of its workers (about two workers per store) .When those cuts were still not enough, management called for store closings in some locations.For example, one of the store closing was announced to employees on August 1 and accomplished by December 1.In locations where stores were not closed, managers were ordered to terminate any under-performing employees, identified by low performance appraisal scores in the last two evaluations.
-Refer to Scenario 6.1.Which of the following is more likely to be a risk associated with laying off employees of BabyBlooms Corp.?

Definitions:

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell shares of a stock at a specified price within a specified time period.

Tax Treatment

The application of tax laws and regulations to various financial transactions, determining how they are taxed.

Executive and Company

This term refers to the relationship or contractual agreements between a company's management, particularly its executive officers, and the company itself.

Covenants Restricting

Clauses in loan agreements that impose limits on the actions of the borrower to protect the interests of the lender.