Which of the Following Statements Is True of Using Stock

question 2

Multiple Choice

Which of the following statements is true of using stock options as incentive pay?

• A) The use of stock options ensures that managers add value in terms of efficiency and customer satisfaction.
• B) Stock options require an option holder to purchase the organization's stocks at its present market rate.
• C) Stock options are rewarding for employees who exercise their option when the company's stock value has risen.
• D) Low-level employees with stock options are more likely to think like owners than executives who have stock options.
• E) A company's performance in the stock market tends to be significantly better if its low-level employees are provided stock options.

Understand the basics of contract formation including offer, acceptance, and consideration.

Recognize the difference between offers and invitations to negotiate.

Identify the conditions under which an offer can be revoked or must remain open.

Comprehend the legal implications of advertisements and solicitations for bids in contract law.

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Definitions:

Equivalent Annual Cost

A financial analysis approach to compare the cost-effectiveness of different assets with differing lifespans by calculating their annual costs.

CCA Class

In Canada, Capital Cost Allowance Classes refer to categories under which business assets are placed for the purpose of depreciation calculation for tax purposes.

Maintenance Costs

Expenses incurred to keep an asset in good working condition or to repair it so it continues to operate effectively.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment.