Practice Free C8 Business Acumen for Compensation Professional Exam Questions Answers With Explanation

The employee

A concerned co-worker

The employee’s manager

The employee’s department head

Compensation professionals should anticipate the level of the audience and tailor messages to their needs.

Compensation terms and practices are unclear to most individuals who do not work in this area and communication should be tailored to the least informed member of the target audience.

The ready availability of information online has made it unnecessary for compensation professionals to tailor messages since individuals can research terms and concepts after the fact if they don’t understand a communication.

Compensation terms are well-known and easily understood by most stakeholders.

It is a precise estimate of what the future holds for the organization.

It is done primarily by using historical revenue and expense data.

It is done primarily by evaluating market conditions and economic indicators.

It uses internal and external factors to help answer questions about business expectations for the future.

Business forecasting

Business analytics

Predictive modeling

Statistical analysis

The industry it operates in

The bottom line

The organizational headcount

The risk tolerance of compensation leaders

Fixed costs must be kept to a minimum, but variable costs can fluctuate since they tend to correlate with revenue.

Variable costs often have a heavier focus than fixed costs, which applies to all areas, including compensation.

Fixed costs and variable costs are equally important and both should be kept to a minimum.

Fixed costs are not a concern because they cannot be changed, so the focus is primarily on variable costs.

A varying mix depending on employee influence on goals to provide the necessary incentive to maximize profits

100% variable pay to motivate all employees to maximize productivity and sales

90/10 for the majority of employees (base/variable) to share in the company’s success with increased variable pay for management/executives to motivate employees to seek higher positions

High base pay and low variable pay to ensure predictability of total compensation expense

Start-up

Growth

Mature

Decline

What the take-home pay will be

How their pay compares to co-workers

How the company sets compensation budgets

How the company makes pay decisions that affect them

The current value of holdings

The current value of holdings and how much it will grow over time at a given rate of return

The desired value in the future and what needs to be invested today to realize that amount

The difference between the desired value in the future and the current value as a percentage of the desired value

The business plan

The corporate objective

The mission statement

The competitive strategy

They typically have the greatest effect on net income and operating results of any organizational expense or program

Their success or failure is closely tied to the success or failure of organizationwide goals and objectives

They have very little effect as long as they are managed effectively and efficiently

They affect the organization’s overall financial status and impact multiple stakeholders across most, if not all, business units

What direction will we take?

How do we work?

Why are we in business?

How will we achieve our objectives?

Because the internal and external environments are constantly changing

Because the best interests of the organization take priority, which can lead to difficult decisions and implementation issues

Because they are emotional issues and stakeholders have many vested interests

Because strong business acumen is required for all compensation decisions

They are all reported on the balance sheet.

They are all sources of capital.

They all incur the same costs to the business.

Nothing. Each of these is a different financial metric.

Compensation costs eventually stabilize and become a consistent percent of revenue.

Compensation costs and revenue increase at approximately the same rate.

Compensation costs eventually decrease as a percent of revenue, increasing profit growth.

Compensation costs remain the same as a percent of revenue until variable compensation costs exceed fixed compensation costs.

Start-up

Growth

Mature

Decline

The change in working capital over a specific period of time, typically one year

A company’s efficiency in converting short-term capital into cash

A company’s mean capital expenditure per employee

The amount of cash needed to meet the company’s short-term obligations