Question

The determinants of bonus decisions are

• A. Age of the company
• B. Liquidity of funds
• C. Amount of profits
• D. All of these

Hint:

Bonus distribution depends on a firm’s financial strength, liquidity, and profitability — not on a single factor alone.

Answer 1

The Correct Option is D

Step 1: Understanding bonus decisions.
A bonus is an additional payment made by an employer to employees as a reward for their contribution to the organization’s success.
Bonus decisions depend on multiple financial and organizational factors that determine how much and when bonuses are distributed.
Step 2: Major determinants of bonus decisions.
- Age of the company: Older companies with stable finances and established markets are often in a better position to pay bonuses than new firms.
- Liquidity of funds: The availability of cash or liquid assets plays a crucial role — even profitable firms may delay bonuses if liquidity is low.
- Amount of profits: The company’s profitability directly affects its capacity to distribute bonuses, as bonuses are usually paid out of profit reserves.
Step 3: Interrelation of factors.
Each of these determinants interacts — for instance, a profitable but cash-strapped company might postpone bonuses, while a financially stable firm may pay consistently.
Step 4: Analysis of options.
- (1) Age of the company: Correct but not sole factor.
- (2) Liquidity of funds: Correct, determines ability to pay.
- (3) Amount of profits: Correct, source of bonus distribution.
- (4) All of these: Correct — all three factors jointly determine bonus policies.
Step 5: Conclusion.
Thus, the determinants of bonus decisions include the company’s age, liquidity, and profitability — hence, All of these.