Question

DQ #1 Compare and contrast compensation plans, such as restricted stock and stock appreciation rights, indicating the key differences with the accounting treatment. Determine the option that would have the least impact on a company's earnings.

DQ #2 The debt to equity ratio is often relied upon by lenders and creditors as a measure of the riskiness of a company. Are there any issues that should be considered when relying on this ratio?

DQ #3 Stakeholders of a company must be aware of the limitations of relying on any specific ratio. Select any ratio and briefly (4-5 sentences) discuss some limitations to the use of this ratio.

DQ #4  Financial leverage is generally defined as the use of borrowed funds to increase profits. Financial risk is more broadly defined to include the risk of default. What is the relationship, if any, between financial risk and financial leverage?  

Answer 1

Doi) There are 5 compensation plans Restricted stock and Shock Appreciation Rights are a of them Restricte of Shocks provides employees with the night to purchase shares at tair market value or at a discount or employees may receine Sheres ad no lort, where as shocke appreciation rights a is a bonus plan that grant not stocle but rather to receine an awond based on the value of company's stock, hence SARS typically provich the employee with a Cash or Stöck payment The Resticked Shicle units are assigned at fair netut Value when they Vest, upon Vashing they are considered Income and portion of Share ŕ with her with held to pay taxes. - If shock Appreciahon Rights Promotor Payment in the form of stock .If this is the Cose that on then the nights are accounted for using an equity methord, The rights are Nalued once divided evenly over the ve es Ronioci w and worked as rights panel in Capital bha

Shareholder's equity. b42) Debt equity i Calonlated as Taral liability / Debt of the company if Refers to the ability of Shareholders to equity to cover all outstanding debt in the event of dowla business downturn it is a pertentar type of geoning Radio, in general a company with high debt equity Reho is higher risk to lenders and investors 093) There are some limitations to those Paños which can be is used by share holders. Some limitations are -) Historical information in information elsed is the analyon is based on Real past Result. a Inflationary effects in financial Statements are released periodically and there for there are time difference between each peniach if there may be inflation occurred in those Persoala a change in accounting policies ~ Seasonal effects es Sede Operational changes. CamScanner

Doll Financial Risk Refers a company's abiling to manage it's debt and financial leverage while business I miles refers to the companys abiling to generate Sufficient revenue to cover its operational expenses. incurrence of forced operating cost in the frums income Stream increases business Resle osmiterly employment of debt in the capital struchire increased financial Risk it [cs inornases with the variability of the Return on equity CamScanne