Firms

question 163

Multiple Choice

Firms

• A)are where entrepreneurs combine resources
• B)are economic units formed by profit-seeking entrepreneurs
• C)are assumed to try to maximize profit
• D)reward entrepreneurs with profits, which are sales revenue minus the cost of production
• E)All of the answers are correct.

---

Definitions:

Dividend Decision

The process by which a company's board of directors decides the amount of profits to be distributed to shareholders and the amount to be retained.

Signaling Effect

The signaling effect is a theory in finance suggesting that the actions of a company, such as dividend announcements or share buybacks, send signals to the market about its future prospects.

Dividend Policy

A company's approach to distributing profits to its shareholders, determining how much to pay out in dividends and how often.

Investor Confidence

The degree of faith that investors have in the stability and profitability of the financial markets, influencing their willingness to invest.