Which One of These Statements Is a Correct Implication of the Pecking

question 5

Multiple Choice

Which one of these statements is a correct implication of the pecking order theory?

• A)External financing should be limited to debt issues.
• B)The target debt level occurs when the marginal benefit of debt equals the marginal cost of debt.
• C)Companies like financial slack so they can reduce their external capital needs.
• D)Internally funded projects lower the market value of equity.
• E)Profitable firms use more debt.

---

Definitions:

Strategic Business

Pertains to developing long-term plans and decisions that assist an organization in achieving its competitive advantage and goals.

Implementing Plans

The process of putting strategic plans or policies into action to achieve specified goals within an organization.

Learning Organization

An organization that facilitates the learning of its members and continuously transforms itself to better respond to changes in the environment.

Stakeholders

Individuals or groups who have an interest in the decisions and actions of an organization because they are affected by or can affect its outcomes.