According to Pecking-Order Theory, Managers Will Often Choose to Finance

question 108

Multiple Choice

According to pecking-order theory, managers will often choose to finance with:

• A) new equity rather than debt, due to bankruptcy costs.
• B) debt rather than new equity, to avoid reduced share price.
• C) debt rather than retained earnings, to lower the WACC.
• D)new equity rather than debt, to strengthen EPS.

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Definitions:

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The reciprocal action or influence between entities or individuals in psychological and social contexts.

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A rule or standard of behavior that is considered moral or proper within a specific context, professional or otherwise.

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The process by which a person consciously agrees to participate in a research study or medical treatment with full knowledge of all relevant facts and potential risks involved.

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