With Respect to Stock-Based Compensation for Managers,which of the Following

question 7

Multiple Choice

With respect to stock-based compensation for managers,which of the following is most accurate?

• A)It is never a useful means for incentivizing managers to create value.
• B)It has proven to be a useful tool to incentivize managers to create value in most cases.
• C)There is not enough evidence to reach conclusions concerning its effectiveness.
• D)It may be useful,but when it is used,macroeconomic and industry effects should be removed in formulating the compensation.

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Definitions:

Income

The money or other benefits received, usually in return for labor, services, or investment, constituting the basis for consumption and savings.

MRP Curve

The Marginal Revenue Product curve, representing the additional revenue generated by employing one more unit of a resource or factor of production.

Labor Demand

The complete number of employees that employers are prepared and capable of hiring at a certain salary level during a specific timeframe.

Profit

The financial gain achieved when the revenue from business activities exceeds the expenses, costs, and taxes needed to sustain those activities.