Which of the Following Statements About Share-Based Managerial Compensation Is

question 153

Multiple Choice

Which of the following statements about share-based managerial compensation is correct?

• A) It may cause dysfunctional behaviour in the short-run as managers try to drive up the company's share price.
• B) Exercising the option as soon as it is granted will leave the manager better off from a cash standpoint.
• C) Share options are always guaranteed to increase in value over time.
• D) Managers always prefer to receive share options instead of year-end bonuses.

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Definitions:

Prepayment

Payment made for goods or services before they have been received or provided, often resulting in a current asset on the balance sheet.

Deferred Rent

An accounting practice where rent expenses are not immediately recognized but instead allocated over future periods to match usage with expense.

Financial Statements

Papers that give a summary of a company's financial status, featuring the balance sheet, income statement, and statement of cash flows.

Prepaid Rent

Rent payments made in advance of the rental period; it is recorded as an asset until the period to which it applies passes.