9: Employee Compensation

Question 1

Interest cost is the increase in:
due to:

Answer 1

increase in PBO due to the passage of time

Question 2

sharebased compensation

Restricted stock options cannot be sold until:

Answer 2

vesting has occured

Question 3

Share based compensation

Performance stock is contigent on meeting:

Answer 3

metrics (ROA/ROE)
or
accounting earnings/
financial metric

Question 4

cash settled share based compensation

stock appreciation rights give employees the right to receive compensation based on:

Answer 4

increases in the price of a firm’s stock, over a predetermined amount

Question 5

The major difference between share based compensation (stock options) & cash settled share based compensation (stock appreciation rights):

Answer 5

stock appreciation rights do not dilute the value of the stock, since no shares are actually issued

Question 6

cash settled share based compensation

Phantom stock, is based on performance of:

Answer 6

a hypothetical stock