Question

Rajesh works in a software company. This company is growing by leaps and bounds. The

employees are happy as they get timely salaries, their basic incentive, are also supported by

regular increments in their salaries every year. The HR department these days is busy

calculating the various expenditures the company will have to incur in paying the employees.

The company however has decided to increase the fringe benefits like car allowance, foreign

trips, etc. With this step the company will enter into the list of few chosen companies to do

so. For the elderly members of the organisation the company has decided to include gratuity

in the list of benefits along with already given benefits like pension and provident fund.

However there are a few more steps taken by the company in the direction of providing

financial incentives which can be considered truly unique. It is about providing company’s

shares at price lower than the market price. All these steps have lifted the morale of the

employees.

Which financial incentives have been highlighted in the above case?​

Answer 1

Answer:

Capital structure is the concept of Financial Management as advised by Mr. Seth in the above situation. Capital structure refers to the mix between owners funds and borrowed funds.

Answer 2

Allowances, fringe benefits, stock-option, retirement benefits are the financial incentives given in the above case.

Explanation:

The following are the financial incentives highlighted in the above case study:

• Allowances and payment: The employees are satisfied since they are getting their salaries on time, as well as an annual increase in salaries and also receiving a dearness allowance.
• Fringe benefits: The company has increased perquisites like foreign trips, car allowances, etc. Fringe benefits are different from allowances as they are not paid directly in the form of money but they have their monetary value.
• Stock-option: The company has boosted the morale of employees by providing stock-option which means providing the company shares to the employees at a lower price than the market price.
• Retirement welfare: gratuity is added to already given benefits like pension and provident fund for the elderly members of the company.