The Pecking Order Theory of Capital Structure Predicts That

question 70

Multiple Choice

The pecking order theory of capital structure predicts that:

• A) If two firms are equally profitable, the more rapidly growing firm will borrow more, other things equal
• B) Firms prefer equity to debt financing
• C) Risky firms will end up borrowing less
• D) Risky firms will end up borrowing more

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Definitions:

Pitch Perception

The process by which sounds are interpreted as being high or low, dependent on the frequency of the sound waves.

Frequency Theory

A theory in hearing that suggests the perception of pitch is related to the frequency at which the entire basilar membrane vibrates.

Place Theory

A theory in psychology that explains how humans perceive sound frequencies based on the specific location of hair cells stimulated in the cochlea.

Place Theory

A theory in hearing that suggests different areas of the basilar membrane respond to various frequencies, enabling us to distinguish sounds.