CEP Equity Compensation Plans & Design

Question 1

What is the main objective of equity compensation plans?

Accepted Answer

To align employee interests with shareholders

Answer

To retain employees

Answer

To reduce taxes

Answer

To increase profits

Question 2

Which of the following is a common form of equity compensation?

Accepted Answer

Stock options

Answer

Bonus payments

Answer

Retirement plans

Answer

Hourly wages

Question 3

What factor should be considered when designing an equity compensation plan?

Accepted Answer

Company goals and financial health

Answer

Employee tenure

Answer

Number of employees

Answer

Management preference

Question 4

Which of the following best describes a stock option?

Accepted Answer

A right to purchase stock

Answer

A bonus

Answer

A retirement benefit

Answer

A fixed compensation

Question 5

Why are vesting schedules used in equity compensation?

Accepted Answer

To encourage retention

Answer

To calculate dividends

Answer

To increase stock value

Answer

To reduce taxes

Question 6

What is an advantage of performance-based equity compensation?

Accepted Answer

It aligns interests

Answer

It reduces payroll

Answer

It reduces risk

Answer

It ensures profits

Question 7

What does a stock appreciation right (SAR) allow employees to do?

Accepted Answer

Benefit from stock value increase

Answer

Buy stock at a discount

Answer

Earn performance bonuses

Answer

Sell stock immediately

Question 8

How does a restricted stock unit (RSU) differ from stock options?

Accepted Answer

RSUs grant shares outright

Answer

RSUs need a purchase price

Answer

Stock options grant shares without conditions

Answer

Stock options are taxable immediately

Question 9

What is a common metric used to determine the value of stock options?

Accepted Answer

The Black-Scholes model

Answer

The CAPM model

Answer

The DCF model

Answer

The ROI formula