According to the Signaling Theory of Capital Structure, the Issuance

question 53

True/False

According to the signaling theory of capital structure, the issuance of equity for a firm with various financing alternatives signals that the firm has unfavorable prospects which it wants to share with new shareholders.

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Definitions:

Cumulative Earnings

The total amount of net income an entity has earned over its life, up to the current reporting date, not yet distributed to shareholders.

FICA-Medicare

A federal payroll (or employment) tax contribution towards Medicare, part of the FICA taxes in the United States.

Cumulative Earnings

The total amount of net income (or loss) earned by a company over a period of time, often used to measure its financial performance.

OASDI

An acronym for Old-Age, Survivors, and Disability Insurance, which is a comprehensive federal benefits program that provides benefits to eligible American workers and their families.