The Pecking-Order Theory Suggests That Less Profitable Firms Borrow More

question 60

Multiple Choice

The pecking-order theory suggests that less profitable firms borrow more because:

• A)Equity issues are more expensive
• B)Leverage is preferred over raising funds internally
• C)Debt issues are good omens
• D)They have insufficient internal funds

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Definitions:

Low-Cost Leadership

A business strategy where a company becomes the lowest cost producer in its industry without sacrificing quality.

Raw Material Waste

Unwanted or unusable materials generated during the production process or from the consumption of raw materials, which can impact efficiency and environmental sustainability.

Competitive Advantage

The unique attributes or capabilities that allow an organization to outperform its competitors, resulting in greater sales or margins and/or retaining more customers.

Customization

The process of modifying or building a product or service to meet the specific requirements or preferences of an individual user or group.