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:

Sociometric Structure

The pattern of relationships and social networks within a group, measured through sociometric techniques.

Attraction Structure

The pattern or framework of how attractions (social, sexual, or otherwise) are organized within a social group or society.

Interactionist Theory

A theory that emphasizes that the development of individuals is shaped by the interaction of personal characteristics and the environmental or social context.

Psychological Dynamic

The interplay of various psychological forces or factors that influence behavior and mental states.