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:

Financial Break-Even

The point at which total revenues are equal to total operational and financial costs, indicating a project or company is not losing money but not making profit either.

Required Return

The minimum expected return an investor seeks on an investment, considering the risk associated with it.

Contribution Margin

The amount by which sales revenue exceeds variable costs, indicating how much revenue is contributing to fixed costs and profit.