By Making Managerial Compensation Depend on the Performance of the Firm's

question 74

Multiple Choice

By making managerial compensation depend on the performance of the firm's profits,the firm owner's profits:

• A) rise.
• B) fall.
• C) remain constant.
• D) initially fall, then rise.

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Definitions:

Outstanding

Refers to shares that are currently owned by investors, including public shareholders, company officials, and insiders.

Earnings Per Share

A financial metric that calculates the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of a company's profitability.

Stock Dividend

A distribution of additional shares of a company's stock to its shareholders without any change in ownership percentage.

Stock Split

A corporate action where a company divides its existing shares into multiple shares to boost the liquidity of the shares, although the overall value of the company does not change.