Answer: 3

When using dummy variables to represent categorical variables in regression analysis, the general rule is: **Number of dummy variables = Number of categories - 1** This is because one category serves as the reference (baseline) category, and the other dummy variables represent the differences from this baseline. Given: - Number of categories = 4 - Number of dummy variables needed = 4 - 1 = 3 Therefore, 3 dummy variables are needed to distinguish among four different categories of companies. The sample size of 20 companies is irrelevant to this calculation.

Author: LeetQuiz Editorial Team