How might this approach encourage poor business decisions

Assignment Help Accounting Basics

Reference no: EM13127329

Sunshine Groceries operates a rapidly expanding chain of retail grocery stores in Europe. The company has grown from 10 stores in 2009 to 50 stores in 2011 and plans to add at least 10 stores each year for the next 3 years. Top executives at the company can earn annual cash bonuses of up to 200% of salary if board-approved sales growth goals are achieved.

Explain why it might make sense for this company to award bonuses based on sales growth. How might this approach encourage poor business decisions when compared to a bonus plan tied to earnings?

Reference no: EM13127329

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