The accountant for Sysco Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Retained earnings balance at the beginning of the year $ 819,000 Net income for the year 230,000 Cash dividends declared for the year 42,000 Retained earnings balance at the end of the year 1,007,000 Cash dividends payable at the beginning of the year 10,000 Cash dividends payable at the end of the year 11,000 What is the amount of cash dividends paid that should be reported in the financing section of the statement of cash flows
Answer: $41000
Explanation:
The amount of cash dividends paid that should be reported in the financing section of the statement of cash flows will be calculated thus:
Beginning dividend = $10000
Add: Dividend declared = $42000
Less: Ending dividend payable = $11000
Cash dividend paid = $41000
Match each current trend with the advantage it provides for the global
economy
Reduction of
trade barriers
?
Facilitates international
business and trade
Allows for a greater
mobility of goods and
labor
Industrialization
?
Improved
communication
Reduces production and
transportation costs
Development of
infrastructure
Enables economic growth
in developing countries
Answer:
Find answers below.
Explanation:
1. Reduction of trade barriers: allows for a greater mobility of goods and labor.
Some examples of trade barriers are import license, quotas, subsidies, embargo, currency devaluation, local content requirements, tariffs, etc.
A tariff can be defined as tax levied by the government of a country on goods and services imported from another country.
2. Industrialization: enables economic growth in developing countries.
Industrialization can be defined as a strategic process which typically involves the development of various industries in a country by the large-scale introduction of mechanized equipments and use of technology for the manufacturing of goods and services that meets the need or requirements of consumers.
3. Improved communication: facilitates international business and trade.
Basically, when there is an effective and efficient level of communication between two or more countries, it would help to facilitate and enhance the exchange of goods and services between the countries.
4. Development of infrastructure: reduces production and transportation costs.
Typically, when there are good infrastructural development such as roads, electricity, etc., in a society it would ease the movement of goods and services, as well as the cost of production and transportation.
Correctly complete the following statement. We may be more likely to consider using qualitative forecasting techniques when Select one: a. a lot of historical (quantitative) demand data exists. b. we are faced with a short-term, operational decision-making problem. c. the relevant environment is likely to be quite stable (less variable) over the forecast horizon. d. the forecast horizon is long (e.g., more than three to five years).
Answer:
b
Explanation:
There are two types of forecasting method
1. Qualitative forecasting
2. Quantitative forecasting
Qualitative forecasting can be described as when subjective judgement or non quantifiable information in forecasting.
When is qualitative forecasting suitable ?
It is used when historical data in unavailable. this method is suitable when it is predicted that future result would depart from what historical data may suggestAdvantages of Qualitative forecasting
it is flexible It can be used when data available is ambiguous or unclearDisadvantage of Qualitative forecasting
It is subjective.
Quantitative forecasting can be described as forecasting using historical data
A manager of a company is facing an ethical problem. He uses the formal process for ethical decision making to resolve the problem. Which of the following steps will they begin with
Answer: Understanding all the moral standards and recognizing all moral impacts.
Explanation:
Ethics is the standards and the moral principles which guide the behavior of an individual or group of people. Ethical decision making reefers to the assessment of the moral implications of a course of action.
Since the manager uses the the formal process for ethical decision making to resolve the problem, the first step to begin with is to understand the moral standards and recognizing all moral impacts. The manager needs to be aware of the moral standards and be sure if he or she is following the normal process and doing the right thing.
Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses the cost recovery method to recognize revenue on these installment sales. In 2020, Lake began operations and sold jet skis with a total price of $900,000 that cost Lake $450,000. Lake collected $300,000 in 2020, $300,000 in 2021, and $300,000 in 2022 associated with those sales. In 2021, Lake sold jet skis with a total price of $1,290,000 that cost Lake $774,000. Lake collected $430,000 in 2021, $240,000 in 2022, and $240,000 in 2023 associated with those sales. In 2023, Lake also repossessed $380,000 of jet skis that were sold in 2021. Those jet skis had a fair value of $142,500 at the time they were repossessed.In its December 31, 2021, balance sheet, Lake would report:
Answer:
$650,000
Explanation:
Calculation to determine what Lake would report in its December 31, 2021, balance sheet
First step is to calculate Net installment Receiveble for 2020 sales
2020 sales Installment Receiveble 300,000
($900,000-$300,000 2018 Collection -$300,000 2021 Collection)
Less Deferred gross profit $150,000
(450,000-$150,000 2020 collection-$150,000 2021 collection )
Net installment Receiveble for 2020 sales $150,000
Second step is to determine Net installment Receiveble for 2021 sales
2021 sales Installment Receiveble $860,000
($1,290,000-$430,000
Less Deferred gross profit $360,000
($600,000-$240,000)
Net installment Receiveble for 2021 sales $500,000
Now let determine what Lake would report in its December 31, 2021, balance sheet
December 31, 2021, balance sheet=$150,000+$500,000
December 31, 2021, balance sheet=$650,000
Therefore In its December 31, 2021, balance sheet, Lake would report: $650,000
would u act diffetently
During March, XYZ Inc. transferred $50,000 from Work in Process to Finished Goods and recorded a Cost of Goods Sold of $56,000. The journal entries to record these transactions would include a:
Answer:
Date Journal entries Debit Credit
Finished Goods $50,000
Work in Process $50,000
Cost of Goods Sold $56,000
Finished Goods $56,000
What expenses typically come first in the "Expenses" section of an income statement? a. Non-operating expenses b. Irregular expenses c. Selling, general and administrative expenses d. Tax expenses
Answer:
c. Selling, general and administrative expenses
Explanation:
Financial statements can be defined as a document used for the formal communication or disclosure of financial information and statements to present and potential users such as investors and creditors. These includes balance sheet, statement of retained earnings and income statement.
The expense recognition principle is an accounting principle which is typically used on accrual basis accounts and it states that expenses incurred by an individual or business entity should be recognized and matched in the same period with respect to the revenues they are related to.
Selling, general and administrative expenses typically come first in the "Expenses" section of an income statement.
A listing broker should: a. deliberately mislead owners about market value to obtain the listing. b. inflate the list price if the owner wants her property listed at an unrealistic price. c. suggest a listing price based on comparable market data. d. not disclose relevant comparable data to the owner if the listing broker is in competition with other brokers for the listing.
Answer:
c. suggest a listing price based on comparable market data.
Explanation:
A bond can be defined as a debt or fixed investment security, in which a bondholder (creditor or investor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time.
Generally, the bond issuer is expected to return the principal at maturity with an agreed upon interest to the bondholder, which is payable at fixed intervals.
The par value of a bond is its face value and it comprises of its total dollar amount as well as its maturity value. Also, the par value of a bond gives the basis on which periodic interest is paid. Thus, a bond is issued at par value when the market rate of interest is the same as the contract rate of interest. This simply means that, a bond would be issued at par (face) value when the bond's stated rated is significantly equal to the effective or market interest rate on the specific date it was issued.
Generally, a listing broker should suggest a listing price based on comparable market data.
A company reports the following beginning inventory and purchases for the month of January. On January 26, the company sells 350 units. 150 units remain in ending inventory at January 31. Units Unit CostBeginning inventory on January 1 320 $ 3.00 Purchase on January 9 80 3.20 Purchase on January 25 100 3.34 Assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the FIFO method. (Round your per unit costs to 2 decimal places.)A company reports the following beginning inventory and purchases for the month of January. On January 26, the company sells 350 units. 150 units remain in ending inventory at January 31. Units Unit CostBeginning inventory on January 1 320 $ 3.00 Purchase on January 9 80 3.20 Purchase on January 25 100 3.34 Assume the periodic inventory system is used. Determine the costs assigned to ending inventory when costs are assigned based on the LIFO method. (Round your per unit costs to 2 decimal places.)
Answer:
The costs assigned to ending inventory based on the LIFO method under periodic inventory system are:
= $450.
Explanation:
a) Data and Calculations:
On January 26, the company sells 350 units. 150 units remain in ending inventory at January 31.
Units Unit Cost Total Cost
Beginning inventory on January 1 320 $ 3.00 $960
Purchase on January 9 80 3.20 256
Purchase on January 25 100 3.34 334
Tota units available for sale 500 $1,550
Sales on January 26 350 $1,100
Ending inventory at January 31 150 $3.00 $450
Last month when Holiday Creations, Inc., sold 44,000 units, total sales were $308,000, total variable expenses were $215,600, and fixed expenses were $35,700. Required: 1. What is the company’s contribution margin (CM) ratio? 2. What is the estimated change in the company’s net operating income if it can increase total sales by $1,800?
Answer: 1) CM / Sales = CM Ratio
CM = 306,000 - 238,680 = 67,320
CM Ratio = 67,320 / 306,000 = 0.22
2) CM Ratio x 2,500 = 550
Explanation:
An investment that costs $105,000 today is expected to produce the following cash inflows over each of the next five years: $20,000; $25,000; $23,000; $22,000; $21,000. What is the IRR (compounded annually) for this investment
Answer: 1.89%
Explanation:
You can use Excel to find the IRR here:
Investment amount should be first as shown and should be in negative.
The cash flows will then follow each other by year.
Use the =IRR formula to select all the cells and the IRR will show.'
IRR here = 1.89%
You own a stock portfolio invested 30 percent in Stock Q, 25 percent in Stock R, 25 percent in Stock S, and 20 percent in Stock T. The betas for these four stocks are .80, 1.18, 1.19, and 1.36, respectively. What is the portfolio beta
Answer:
The Portfolio beta is 1.1045
Explanation:
The computation of the portfolio beta is given below:
Stock Beta Investment (Weight) Weighted Beta
Stock Q 0.8 0.3 0.2400
Stock R 1.18 0.25 0.2950
Stock S 1.19 0.25 0.2975
Stock T 1.36 0.2 0.2720
Portfolio beta 1.1045
Tariffs are a tax placed on ✔ imported goods.
Tariffs are used to give domestically produced goods ✔ an advantage in the market.
As a result of tariffs, imported goods become ✔ more expensive for consumers
Answer:
Imported, an advantage, more.
Explanation:
This is done to discourage the use of foreign items and use of domestically made products. This helps the domestic companies to get their advantage in profit and sales. Thereby making the imported goods more expensive and discourages their use.Answer:
Tariffs are a tax placed on
✔ imported
goods.
Tariffs are used to give domestically produced goods
✔ an advantage
in the market.
As a result of tariffs, imported goods become
✔ more
expensive for consumers
Explanation:
Synovec Company is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 4 percent thereafter. If the required return is 10 percent, and the company just paid a dividend of $2.65, what is the current share price
Answer:
$87.03
Explanation:
Calculation to determine the current share price
First step is to calculate p1
p1= $2.65(1+.30)^3(1+.04) / (.10 - .04)
p1= $2.65(1.30)^3(1.04) / (.10 - .04)
p1=6.054932/.06
p1=100.92
Now let calculate the Current price
p0= [$2.65(1.30) / 1.10] +[$2.65(1.30)^2 / 1.10^2] + [$2.65(1.30)^3 / 1.10^3] + [$100.92/ 1.10^3]
p0=3.1318+4.4782/1.21+5.82205/1.331+$100.92/1.331+
p0=3.1318+3.700992+4.37419+75.82
p0=$87.03
Therefore the current share price is $87.03
Supply-side economists believe that a reduction in the tax rate a. always decrease government tax revenue. b. would decrease consumption. c. provides no incentive for people to work more. d. shifts the aggregate supply curve to the right.
Answer: D. shifts the aggregate supply curve to the right.
Explanation:
Supply side economics refers to the macroeconomic theory which states that the economic growth in an economy can be improved by the reduction in taxes and decrease in regulations.
Such Economists believe that this is vital as the consumers will benefit as there'll be an increase in the supply of goods from the manufacturers. Also, there'll be reduction in prices due to less taxes being paid. Also, there'll be an increase in employment.
Discuss the six HRM practices from which companies can choose for implementing their strategy. Illustrate by specific examples.
Answer:
Explanation:
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If a company is using past email responses as a segmentation strategy, the best approach for individuals who have not responded to multiple email offers is to:_________
a. offer them free merchandise if they place an offer
b. offer free shipping on any order
c. send an email inquiry requesting an update on their contact information
d. drop them from the email list
Answer: a. offer them free merchandise if they place an offer
Explanation:
When a customer is not replying via email, the best way to get them to be responsive again is to offer them some form of special that would allow them to make savings on a purchase of goods.
One such method would be by offering them free merchandise if they make an offer. Chances are that they would become responsive so as to take advantage of this offer.
When the management team reviewed its government contract on office chairs, they noticed that in order to bid on the project, at least 37 percent of the value of the office chairs had to be produced in the United States. This stipulation is an example of a(n)
Answer:
local content requirement.
Explanation:
In the case when the management team is reviewed the government contract so they notice that minimum 37% of the office chairs value should be generated so this stipulation represent the local content requirement as under this clause, the firm is needed to source the goods portion from the local producers
Therefore the above term should be the answer
Required information Skip to question [The following information applies to the questions displayed below.] Tamar Co. manufactures a single product in two departments. All direct materials are added at the beginning of the Forming process. Conversion costs are added evenly throughout the process. During May, the Forming department started 21,600 units, and transferred 22,200 units of product to the Assembly department. Its 3,000 units of beginning work in process consisted of $19,800 of direct materials and $221,940 of conversion costs. It has 2,400 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $496,800 of direct materials costs and $2,165,940 of conversion costs were charged to the Forming department. The following additional information is available for the Forming department. Beginning work in process consisted of 3,000 units that were 100% complete with respect to direct materials and 40% complete with respect to conversion. Of the 22,200 units transferred out, 3,000 were from beginning work in process. The remaining 19,200 were units started and completed during May. Assume that Tamar uses the FIFO method to account for its process costing system. 2. Prepare the journal entry dated May 31 to transfer the cost of units to Assembly.
Answer:
Tamar Co.
Journal Entry:
May 31: Debit Work in Process (Assembly):
Materials costs $510,600
Conversion costs $2,097,900
Credit Work in Process (Forming) $2,608,500
To transfer the cost of units to the Assembly Department.
Explanation:
a) Data and Calculations:
Units Materials Conversion
Beginning work in process 3,000 100% 80%
Units started in May 21,600
Total units available 24,600
Units transferred out 22,200
Ending work in process 2,400
Equivalent units of production:
Beginning work in process 3,000 0 (0%) 1,800 (60%)
Units started and completed 19,200 19,200 (100%) 19,200 (100%)
Ending work in process 2,400 2,400 (100%) 1,920 (80%)
Equivalent units 21,600 22,920
Cost of production:
Costs incurred during the year $496,800 $2,165,940
Equivalent units 21,600 22,920
Cost per equivalent units $23 $94.50
Allocation of costs:
Units transferred out $510,600 $2,097,900 $2,608,500
($23 * 22,200) ($94.5 * 22,200)
Ending work in process $55,200 $181,440 $236,640
Journal Entry Analysis:
Work in Process (Assembly): Materials costs $510,600 Conversion costs $2,097,900 Work in Process (Forming) $2,608,500
a. What is the total cost for a basket of goods that includes 210 gallons of gas, 55 pizzas, 40 6-packs, and 2 textbooks
Answer:
Total Cost Base year = $815Last year Total cost = $1,464.35Explanation:
In the base year, the total cost was:
= (210 * 1.30) + (55 * 3.60) + (40 * 3.90) + (2 * 94)
= 273 + 198 + 156 + 188
= $815
Last year, the total cost was:
= (210 * 1.60) + (55 * 7.65) + (40 * 6.64) + (2 * 221)
= 336 + 420.75 + 265.60 + 442
= $1,464.35
Notice that the total cost increased last year from the base year. This is the effect of inflation. Things get more expensive overtime.
For each of the following corporate formations, (1) write the amount of gain or loss that will be recognized by the shareholders as a whole, and (2) write the corporation's basis in the property after the transfer.
a. John and Kelly started Back Stop, Inc., in 2021. Kelly transferred a building with a basis of $120,000 and a FMV of $150,000 for 60% of the stock.
b. John agreed to operate the company on a day-to-day basis in exchange for his stock. Ignore any compensation income recognized by John.
Answer:
Back Stop, Inc.
1. The amount of gain or loss that will be recognized by the company:
a. $30,000 gain
b. $80,000 loss
2. The corporation's basis in the property after the transfer:
a. $150,000
b. ($80,000)
Explanation:
1) Data and Calculations:
a. Building $150,000 Capital, Kelly $120,000 Unrealized gain $30,000
b. Unrealized loss $80,000 Capital, Kelly $80,000
2) The building contributed by Kelly is worth $150,000 for the corporation. However, the contribution by John is worth nothing in real terms. Instead, an unrealized loss is being suffered by the corporation.
If the demand for donuts is elastic, then a decrease in the price of donuts will a. not change total revenue of donut sellers. b. There is not enough information to answer this question. c. decrease total revenue of donut sellers.
Answer:
increase the total revenue of donut sellers.
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one
Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.
Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases
Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.
If demand is elastic and price is reduce, the percentage reduction in price would be less than the total increase in quantity demanded. As a result, there would be an increase in total revenue.
A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a:________
A. Credit to Interest Income
B. Credit to Premium on Bonds Payable.
C. Credit to Discount on Bonds Payable.
D. Debit to Premium on Bonds Payable
E. Debit to Discount on Bonds Payable
The following is a news item reported by Reuters:
WASHINGTON, Jan 29 (Reuters)—Wright Medical Group, a maker of reconstructive implants for knees and hips, on Tuesday filed to sell 3 million shares of common stock.
In a filing with the U.S. Securities and Exchange Commission, it said it plans to use the proceeds from the offering for general corporate purposes, working capital, research and development, and acquisitions.
After the sale there will be about 31.5 million shares outstanding in the Arlington, Tennessee-based company, according to the SEC filing.
Wright shares closed at $17.15 on Nasdaq.
The common stock of Wright Medical Group has a par of $.01 per share.
Required:
Prepare the journal entry to record the sale of the shares assuming the price existing when the announcement was made and ignoring share issue costs. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)
Answer:
Date Account Title Debit Credit
January 29 Cash $51,450,000
Common stock $30,000
Additional Paid-In capital $51,420,000
Explanation:
Company wants to sell 3 million shares at $17.15.
The cash they will make from this is:
= 3,000,000 * 17.15
= $51,450,000
The par value of this common stock sale is:
= number of shares * par value
= 3,000,000 * 0.01
= $30,000
Additional paid-in capital will be:
= Cash - Common stock par value
= 51,450,000 - 30,000
= $51,420,000
22.On January 1, 2021, Amazon purchased a $64,000 office equipment and expected its useful economic life of 5 years. At the end of year 5th, the company expected to sell the equipment for $4,000. It is now December 31, 2021. Which of the following entries are needed to be made before preparing financial statements?
a. Debit Office equipment $64,000; Credit Cash $64,000
b. Debit Depreciation expense - Office equipment $64,000; Credit Cash $64,000
c. Debit Depreciation expense - Office equipment $12,000; Credit Accumulated depreciation – Office equipment $12,000
d. Debit Accumulated depreciation – Office equipment $12,000; Credit Depreciation expense - Office equipment $12,000
Answer:
C.
Explanation:
64000-4000 (salvage value)=60000
60000/5=12000 (annual depreciation)
depreciation expense. 12000
Accumulated depreciation. 12000
Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 common size percentages for cost of goods sold using Net sales as the base.
2017 2016
Net sales $522,200 $423,400
Cost of goods sold 219,400 135,440
Operating expenses 79,990 $77,090
Net earnings 40,420 28,670
a. 42.0% for 2017 and 32.0% for 2016.
b. 7.7% for 2017 and 6.8% for 2016.
c. 123.3% for 2017 and 100.0% for 2016.
d. 57.3% for 2017 and 50.2% for 2016.
e. 174.4% for 2017 and 199.2% for 2016.
Answer:
a. 42.0% for 2017 and 32.0% for 2016
Explanation:
Common size % for cost of goods sold = Cost of goods sold/Net sales
For 2017
= $219,400 / $522,200
= 0.4201456
= 42%
For 2016
= $135,440 / $423,400
= 0.31988663
= 31.99%
"ng liquidity) Aylward Inc. currently has $ in current assets and $ in current liabilities. The company's managers want to increase the firm's inventory, which will be financed by a short-term note with the bank. What level of inventories can the firm carry without its current ratio falling belo"
Answer: $209,500
Explanation:
Current ratio = Current assets / Current liabilities
They plan to increase current assets by increasing inventory. They plan to do this by using a short term note which is a current liability. Both the numerator and the denominator will therefore increase.
Assume the maximum inventory increase to be:
2.20 = (2,161,000 + x) / (868,000 + x)
2.20 * 868,000 + x = 2,161,000 + x
1,909,600 + 2.20x = 2,161,000
2.20x - x = 2,161,000 - 1,909,600
1.20x = 251,400
x = 251,400 / 1.2
x = $209,500
Assume that it is January 1, 2019, and that the Mendoza Company is considering the replacement of a machine that has been used for the past 3 years in a special project for the company. This project is expected to continue for an additional 5 years (i.e., until the end of 2023). Mendoza will either keep the existing machine for another 5 years (8 years total) or replace the existing machine now with a new model that has a 5-year estimated life. Pertinent facts regarding this decision are as follows:
Keep Existing Machine Purchase New Machine
Purchase price of machine (including transportation, setup charges, etc.) $ 150,000 $ 190,000
Useful life (determined at time of acquisition) 8 years 5 years
Estimated salvage value, end of 2023* $ 20,000 $ 25,000
Expected cash operating costs, per year:
Variable (per unit produced/sold) $ 0.25 $ 0.19
Fixed costs (total) $ 25,000 $ 24,000
Estimated salvage (terminal) values:
January 1, 2019 $ 68,000
December 31, 2023 $ 12,000 $ 22,000
Net working capital committed at time of acquisition of existing machine (all fully recovered at end of project, December 31, 2023) $ 30,000
Incremental net working capital required if new machine is purchased on January 1, 2019 (all fully recovered at end of project, December 31, 2023) $ 10,000
Expected annual volume of output/sales (in units), over the period 2019–2023 500,000 500,000
*Note: These amounts are used for depreciation calculations.
Assume further that Mendoza is subject to a 40% income tax, both for ordinary income and gains/losses associated with disposal of machinery, and that all cash flows occur at the end of the year, except for the initial investment. Assume that straight-line depreciation is used for tax purposes and that any tax associated with the disposal of machinery occurs at the same time of the related transaction.
Required:
1. Determine relevant cash flows (after-tax) at time of purchase of the new machine (i.e., time 0: January 1, 2019).
2. Determine the relevant (after-tax) cash inflow each year of project operation (i.e., at the end of each of years 1 through 5).
3. Determine the relevant (after-tax) cash inflow at the end of the project's life (i.e., at the project's disposal time, December 31, 2023).
5. Determine the undiscounted net cash flow (after tax) for the new machine and determine whether on this basis the old machine should be replaced.
Answer:
C
Explanation:
c is the answer just trust
Shareholders may prefer the compensation package that includes stock options because the options give the CEO the incentive to maximize the price of the company's stock, thus benefiting the shareholders. A fixed salary, regardless of stock price performance, can lead to a CEO who is willing to do the minimum necessary to maintain the job, but who is not motivated to work extra hard for shareholders.
a. True
b. False
Answer: True
Explanation:
There exists a problem known as the Agency Problem between managers and the shareholders of a company. The manager is the agent and the shareholders are the owners. Sometimes, it has been shown that the agent might act in their best interests as opposed to be best interests of the owners of the business.
To solve this, the manager should be made an owner as well and one way to do so is to give them stock options. This way, they will be motivated to work hard for the owners because they will benefit as well.
