Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Shares

Question:

What is the purpose of an ESOP "exercise period"?

Options:

It's the period during which employees can choose to vest their options

It's the period during which the company can buy back the vested shares from employees

It's the period during which employees can exercise their right to apply for shares based on vested options

It's the period during which employees can sell their vested shares to external investors

Correct Answer:

It's the period during which employees can exercise their right to apply for shares based on vested options

Explanation:

The purpose of an Employees Stock Option Plan (ESOP) "exercise period" is to specify the timeframe during which employees who have met the vesting conditions can choose to exercise their stock options and apply for shares at the predetermined exercise price.