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C8 – Business Acumen for Compensation Professionals

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Showing 7–9 of 10 questions

Question 7

Your company has had a strong fiscal year with a 15% increase in net income over the prior fiscal year. Share prices are at an all time high. Working with Finance, you have arrived at a 2.5% merit increase budget for the next fiscal year, a smaller increase than the last fiscal year. Finance has indicated that some large capital expenditures will be needed next year, so the company needs to conserve resources. Additionally, Legal is in final negotiations on a lawsuit that may be very costly to the company. Word of the smaller increases has line management concerned that they will lose their best performers. Given all of these factors, what is your best course of action?

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    Implement the merit increase budget as is because the anticipated financial obligations have made it necessary
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    Meet with Finance and make a case for a larger merit increase budget because the loss of key talent will cost more over the long term than the savings from the smaller merit increases
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    Gather the perspectives of all stakeholders, analyze their individual concerns and meet to determine whether a compromise solution is possible
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    Recommend a reduction in force to eliminate poor performers, which will increase the merit budget by reducing headcount
Question 8

What best describes a use of strategic analysis?

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    Pricing your products appropriately
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    Understanding your business and its competitive strengths and weaknesses
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    Forecasting profit, growth and investment performance to develop realistic budgets
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    Evaluating prior year performance for the narrative portion of annual financial reports
Question 9

What choices are most commonly faced by companies in the decline phase of the business lifecycle?

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    Whether to improve productivity, obtain new operating capital or generate new sales growth
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    Whether to reinvest in existing products, create new products or maximize profits with current products as long as possible
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    Whether to acquire competitors with greater market share or merge with more successful companies
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    Whether to increase sales, maximize distribution capacity or increase efficiency to meet growing demand