According to the Signaling Theory of Capital Structure,firms First Use

question 29

True/False

According to the signaling theory of capital structure,firms first use common equity for their capital,then use debt if and only if they can raise no more equity on "reasonable" terms.This occurs because the use of debt financing signals to investors that the firm's managers think that the future does not look good.

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Definitions:

Post-Effective Period

A timeframe following the official effectiveness of a legal document or regulation during which certain provisions or requirements come into effect.

Pre-Filing Period

The phase before official documents or applications are formally submitted or filed, often involving preparation and review.

Waiting Period

A designated amount of time that must pass before an action can take effect or certain rights can be exercised.

Criminal Liability

Refers to the legal responsibility for a breach of law that is punishable by the state.