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Equity theory has been widely applied to business settings by industrial psychologists to describe the relationship between an employee's motivation and his or her perception of equitable or inequitable treatment.
Transformation problem: The transformation problem is the problem specific to Marxist economics, and not to economics in general, of finding a general rule by which to transform the values of commodities based on socially necessary labour time into the competitive prices of the marketplace. The essential difficulty is how to reconcile profit in ...
Merton's portfolio problem is a problem in continuous-time finance and in particular intertemporal portfolio choice. An investor must choose how much to consume and must allocate their wealth between stocks and a risk-free asset so as to maximize expected utility .
Equity theory sees fairness as a key aspect of motivation. According to it, people are interested in the proportion between effort and reward: they judge how much energy one has to invest and how good the outcome is. Equity theory states that individuals assess fairness by comparing their own ratio of effort and reward to the ratio of others. A ...
In economics, the profit motive is the motivation of firms that operate so as to maximize their profits.Mainstream microeconomic theory posits that the ultimate goal of a business is "to make money" - not in the sense of increasing the firm's stock of means of payment (which is usually kept to a necessary minimum because means of payment incur costs, i.e. interest or foregone yields), but in ...
A higher debt-to-equity ratio leads to a higher required return on equity, because of the higher risk involved for equity-holders in a company with debt. The formula is derived from the theory of weighted average cost of capital (WACC). These propositions are true under the following assumptions: no transaction costs exist, and
Interventions based on the 3C-check can best be illustrated with an example. Let us assume a sales manager has performed a 3C-check with her sales representative with respect to a guided sales pitch. Fig. 3. Practical application of the 3C-model: Intervention in case of motivation deficits.
Related to these are various of the economic puzzles, concerning phenomena similarly contradicting the theory. The equity premium puzzle, as one example, arises in that the difference between the observed returns on stocks as compared to government bonds is consistently higher than the risk premium rational equity investors should demand, an ...