Which of the Following Is True About the Pecking Order

question 33

Multiple Choice

Which of the following is true about the pecking order theory?

• A)Management will raise equity when the shares are overpriced on the market.
• B)Management will raise debt finance before using excess retained earnings.
• C)Management will raise equity when the shares are underpriced on the market.
• D)None of the above

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Definitions:

Disbursement Float

The time delay between when a check is written and when it is actually deducted from the payer's account.

Available Balance

The funds in a bank account that are accessible for withdrawal or use, accounting for any pending transactions.

Book Balance

The amount of money on the books or recorded in the financial statements, differing from the actual cash balance due to outstanding checks or deposits in transit.

Zero-balance Account

A type of bank account that maintains a balance of zero, with funds being transferred into it to cover checks written or transactions made.