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chapter 11 notes - Ch 11 I II Stock options key employees...

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Ch. 11 I. Stock options – key employees are given the right to purchase common stock at a fixed price over a specified period of time. As the stock’s price rises above the fixed option price, the value of the option increases a. Ex: option purchase price $30 per share; Market price $75 per share b. Motivates employees to b.i. Focus on employee performance b.ii. Take a long run perspective b.iii. Remain within the company c. Statements c.i. Statement of Retained Earnings – total cumulative amount of reported net income less any net losses and dividends declared since the company started operation c.i.1. Deficit in retained earnings c.i.1.a. created when a company incurs cumulative losses or pays dividends greater than the balance of the RE accounts c.i.2. Restricted Retained earnings c.i.2.a. Legal/Salutatory – most states restrict the amount of treasury stock purchases to the amount of retained earnings c.i.2.b. contractual – loan agreements can include
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