The Pecking Order Theory

question 4

Multiple Choice

The pecking order theory:

• A)predicts that announcement of a new share issue will cause the company's share price to fall.
• B)implies that a company's leverage will depend on the difference between its operating cash flow and its investment needs over time.
• C)predicts that,other things being equal,a company's leverage will be negatively related to its profitability.
• D)All of the given options.

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Definitions:

Reactivity

The propensity of a substance to undergo a chemical reaction with itself or another material.

Self-regulation

The process by which individuals control their behavior in accordance with internal goals or standards.

Temperament

The inherent aspects of an individual's personality, such as moodiness, activity level, and emotional reactivity, often observable from infancy.

Affect

The experience of feeling or emotion that is often a response to stimuli in the environment.