Question

4. Beginning in fiscal 2014 (the year ended February 1, 2015), Krispy Kreme began using pre-tax income instead of EBITDA as a performance metric in its compensation plan. What information in the company’s balance sheets suggests its management may have been responding to changing financial incentives when the performance metric changed?

Answer 1

ANSWER :

Management is responding to the expanded measure of obligation in the fiscal reports. The executives need to keep up an objective obligation value proportion.

Further, it might likewise need to stay away from a circumstance where business develops toutilize obligation, gets motivating forces, but on the other hand is burdened with high intrigue cost and devaluation which may not be equivalent with business development.

In this manner, the management has picked a measurement of benefit after devaluation and enthusiasm, as against prior measurement of benefit before deterioration and intrigue.

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