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:

Breccia

A rock composed of broken fragments of minerals or rock cemented together by a fine-grained matrix, often found in volcanic or sedimentary contexts.

Clasts

Fragments of geological detritus or material broken off from a larger solid body, often found within sedimentary rocks.

Cement

A binder, a substance used in construction that sets and hardens and can bind other materials together, commonly used in concrete to make buildings, roads, and other structures.

Clastic Sedimentary Rocks

Rocks that are composed of broken pieces of older rocks, sedimented together by processes like weathering and erosion.