Which Theory Proposes That Companies Follow a Hierarchy of Financing

question 32

Multiple Choice

Which theory proposes that companies follow a hierarchy of financing sources?

• A)Trade-off theory.
• B)Reverse pecking order theory.
• C)Pecking order theory.
• D)Information asymmetry theory.

---

Definitions:

Economic Investment

The expenditure on capital goods used to produce other goods or services in the future, contributing to a country's productive capacity.

Fermentation System

A biological process using microorganisms to convert organic materials into alcohol, gases, or acidic products.

Entrepreneur

An individual who creates a new business, bearing most of the risks and enjoying most of the rewards, often seen as an innovator and a source of new ideas, goods, services, and business/or procedures.

Production Possibility Frontier

A graph showing the highest possible combinations of two goods that can be made using existing resources and technology.