An Important Implication of Fisher's Separation Theorem Is That

question 25

Multiple Choice

An important implication of Fisher's separation theorem is that:

• A)while the level of investment will depend on management decisions (independent of shareholders' wishes),shareholders will have a preference for given levels of dividend.
• B)shareholders and firm management will have separate interests and directions in decisions on investment,financing and especially dividends,and these have come to be known as an agency problem.
• C)the extent to which a firm should invest can be determined by a simple rule.
• D)the extent of investment undertaken will determine the amount of finance to be raised,and whether that finance will be debt or equity.

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Definitions:

Productivity

A measure of the efficiency of production, often quantified as the ratio of outputs to inputs in the production process.

Capital Stock

Capital Stock represents the total physical or financial assets that a company utilizes for production, including buildings, machinery, and equipment.

Production Possibility Frontier

An illustration representing the peak production capabilities of two items, based on available resources.

Capital

Assets used for the production of goods and services, including machinery, buildings, and equipment.