#1
Which of the following is a common form of employee stock compensation?
401(k)
Profit-sharing
Stock options
Health insurance benefits
#2
What is the primary purpose of an Employee Stock Purchase Plan (ESPP)?
To allow employees to purchase company stock at a discount.
To grant employees restricted stock units.
To provide employees with stock options.
To offer employees profit-sharing opportunities.
#3
Which regulatory body in the United States oversees the accounting and reporting standards for employee stock compensation?
U.S. Securities and Exchange Commission (SEC)
Financial Accounting Standards Board (FASB)
Internal Revenue Service (IRS)
Federal Reserve System (Fed)
#4
Which of the following factors may influence the value of employee stock options?
Market demand for the company's products or services
The number of hours the employee works each week
The employee's job title
The employee's age
#5
What is the purpose of a stock option plan?
To allow employees to purchase company stock at a discounted price.
To grant employees the right to buy company stock at a predetermined price.
To provide employees with a cash bonus based on company performance.
To offer employees ownership of company shares outright.
#6
What is the primary advantage of offering stock options to employees?
Guaranteed income
Tax benefits
Increased employee retention
No dilution of ownership
#7
What is the vesting period in the context of employee stock options?
The period during which employees can exercise their options
The period during which employees can sell their shares
The period during which employees are eligible to receive stock options
The period during which employees must hold onto their shares before selling
#8
Which of the following statements best describes the concept of stock dilution?
The increase in the value of company stock over time.
The reduction in the ownership percentage of existing shareholders due to the issuance of additional shares.
The decrease in the market price of company stock.
The process of converting stock options into actual shares.
#9
In an Initial Public Offering (IPO), how might employee stock compensation be affected?
Employees lose their stock options entirely.
Employees gain the ability to exercise their stock options immediately.
Employees are prohibited from selling their company stock.
Employees may be subject to a lock-up period before selling their company stock.
#10
What is the difference between stock options and stock grants?
Stock options allow employees to buy company stock at a predetermined price, while stock grants give employees company shares outright.
Stock options are always given as part of executive compensation, while stock grants are for all employees.
Stock options are subject to taxation upon grant, while stock grants are taxed upon exercise.
There is no difference between stock options and stock grants.
#11
Which of the following is NOT a potential risk associated with employee stock compensation plans?
Employee turnover
Stock price volatility
Tax implications
Guaranteed returns
#12
How are stock appreciation rights (SARs) different from stock options?
SARs offer employees the option to buy company stock at a predetermined price.
SARs give employees the right to receive the increase in the company's stock price over a specified period.
Stock options give employees the right to sell company stock at a predetermined price.
There is no difference between stock options and SARs.
#13
What is the purpose of using restricted stock units (RSUs) as part of employee compensation?
To give employees the right to buy company stock at a discounted price.
To offer employees ownership of company shares, with restrictions on transferability and vesting requirements.
To provide employees with an immediate cash bonus.
To grant employees the right to receive dividends from company stock.
#14
How do stock options differ from restricted stock units (RSUs) in terms of taxation?
Both stock options and RSUs are taxed upon exercise.
Stock options are taxed upon exercise, while RSUs are taxed upon vesting.
Stock options are taxed upon vesting, while RSUs are taxed upon exercise.
Neither stock options nor RSUs are subject to taxation.
#15
What is the purpose of a cliff vesting schedule in stock compensation plans?
To accelerate the vesting of stock options for employees who have been with the company for a certain period of time.
To delay the vesting of stock options until the company reaches a certain performance milestone.
To prevent employees from selling their stock options for a predetermined period of time.
To require employees to wait for a specific period before any stock options vest.
#16
What is the purpose of using a performance-based vesting condition in employee stock compensation?
To vest stock options based on the company's overall performance in the stock market.
To ensure that employees meet certain performance targets before their stock options vest.
To allow employees to vest their stock options immediately upon grant.
To prevent employees from exercising their stock options until a certain performance condition is met.
#17
What is the difference between ISOs (Incentive Stock Options) and NSOs (Non-Qualified Stock Options)?
ISOs can only be offered to executives, while NSOs can be offered to all employees.
ISOs have preferential tax treatment, while NSOs do not.
ISOs have a longer vesting period compared to NSOs.
There is no difference between ISOs and NSOs.