Firms often use financial performance targets to determine, Ask an Expert

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Firms often use financial performance targets to determine bonus (incentive) compensation for managers. If a firm used a targeted percentage increase in sales, (for example, the goal might be to increase sales by 5%) or a targeted profit margin on sales (the goal might be to achieve a 10% profit margin), how might management achieve these goals? What are the downsides to using these financial targets to determine bonus compensation?

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