According to the Pecking Order Hypothesis,less Profitable Companies in an Asymmetric

question 29

Multiple Choice

According to the Pecking Order Hypothesis,less profitable companies in an asymmetric world will need more ________; they will first seek ________ and will avoid ________.

• A)external funding; equity funding; debt market
• B)internal funding; the use of retained earnings; debt market
• C)external funding; debt financing; equity market
• D)internal funding; the use of retained earnings; equity market

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Definitions:

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Average Rate of Return

A financial ratio that demonstrates the profitability of an investment by comparing the average annual profit to the initial investment cost.

Average Investment

Average investment refers to the mean value of the initial and final investment over a certain period, often used in calculating returns and payback periods.

Average Annual Income

The average amount of money earned per year over a specified period.