A Comparative Analysis of Restricted Stock and Stock Appreciation Rights

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Both restricted stock and stock appreciation rights

Both restricted stock and stock appreciation rights are stock options accorded to employees for good performance. However, issuing of restricted stock has to follow some condition. First, the employee must have served in the organization for a specific duration. Secondly, the employee must meet a particular target to be liable for the stock (Kraus, 2016). On the other hand, stock appreciation has no conditions. Provided there is an increase in the stock price, the employees are given the bonus, without paying any amount. Restricted stock is the most advantageous to employees since it is considered as an income and workers pay income tax for them. Upon their maturity however, the employee assume full ownership as well as that of the tax charges to capital gains. Appreciation stock is subject to taxation before employees acquire it, hence having the least impact on a company's earnings.

Financial Ratios

The three major financial ratios that creditors are most likely to use when making their lending decisions are quick ratio, current ratio, and cash ratio. Quick ratio will be ideal, as it will reveal the company's ability to meet the short-term monetary obligations, particularly liabilities (Delen, Kuzey, & Uyar, 2013). Current ratio is appropriate as it determines the ability of an organization to pay long term and short-term liabilities. Cash ratio is ideal as it establishes whether a company can meet its short-term fiscal obligations. Management can manipulate financial data in three major ways. First, by shifting expenses to a later date to create the image that the organization has a higher liquidity than it essentially does (Delen, Kuzey, & Uyar, 2013). Secondly, by recording the factious revenue to show favorable ratios that are absent in the real sense. Thirdly, by recording revenue prematurely through recording revenue for transactions that are to happen as if they already took place.

Factors when Selecting Inventory Costing System

The best inventory costing system would be absorption costing since it allocates both fixed and variable overhead costs (Levant & Zimnovitch, 2013). The nature of the industry would be a key factor when selecting this costing system. For instance, some methods will work best for service industries while others will not. The second factor is the industry size. While other method would be ideal for individual workers, others will not suit them.

Tracking Performance

Tracking performance by absorption costing can be best realized when performed by line managers. Following that there are fixed and varying overhead costs, line managers are best placed to execute adjustments in case of any change (Stein, et al., 2015). Some of the data that will be useful in tracking performance include actual variable overhead rate, standard variable overhead rate, as well as the actual unit allocation rate in every production line.

References

Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), 3970-3983.

Kraus, H. (2016). Executive stock options and stock appreciation rights. Law Journal Press.

Levant, Y., & Zimnovitch, H. (2013). Contemporary evolutions in costing methods: Understanding these trends through the use of equivalence methods in France. Accounting History, 18(1), 51-75.

Stein, M., Kürzl, A., Mezghani, A., & Nossek, J. A. (2015). Asymptotic Parameter Tracking Performance with Measurement Data of 1-bit Resolution. IEEE Transactions on Signal Processing, 63(22), 6086-6095.

October 30, 2023
Category:

Business Economics

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Company

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539

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