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

question 95

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:

Usable Energy

energy that is available for doing work in a system, after accounting for energy lost as heat or in other unusable forms.

Transformed

Altered in form, appearance, or structure, especially significantly so.

Substrate Concentration

The amount of substrate present that can be acted upon by enzymes in a chemical reaction.

Reaction Rate

The speed at which a chemical reaction proceeds, typically measured by the change in concentration of reactants or products over time.