Why Can Exercising Stock Options Create Cash Flow Problems for Managers

question 6

Essay

Why can exercising stock options create cash flow problems for managers at the exercise date? What is an alternative to this problem?

Demonstrate the ability to prepare a statement of cash flows from provided data.

Evaluate the effect of cash flows on a company's liquidity, financial flexibility, and operating capacity.

Understand how to adjust net income to arrive at net cash flow from operating activities.

Identify and differentiate between operating, investing, and financing activities in the statement of cash flows.

---

Definitions:

Labor Demand Curve

A graph showing the relationship between the quantity of labor demanded by employers and the wage rate.

Quantity of Labor

The total number of labor hours employed in the production of goods and services over a specific period.

Resource Use

Refers to the way in which human societies utilize natural resources to fulfill their needs and wants.