Explain the Pecking Order Theory of Capital Structure

question 73

Essay

Explain the pecking order theory of capital structure.How will this affect the "optimal" capital structure for a firm?

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Definitions:

Disclosure

The act of making information known publicly, especially financial information by a company to comply with legal requirements and inform investors.

LIFO

Last In, First Out, an inventory valuation method where the goods last added to inventory are the first to be sold.

Periodic

Pertaining to or occurring at regular intervals.

Perpetual Basis

An approach or method without a predetermined end date, continuing indefinitely.