Which of the Statements Below Is TRUE

question 31

Multiple Choice

Which of the statements below is TRUE?

• A)Debt capacity refers to the ability to add equity financing to the current borrowing of the firm and still be able to make interest and principal repayments on time.
• B)The asymmetric information foundation for the Pecking Order Hypothesis (POH)is that managers know less about their companies than the outside world.
• C)There are three implications of the POH.One of these is that profitable companies will borrow less (because they have more internal funds available)and may have lower debt-equity ratios because they have more debt capacity.
• D)There are three implications of the POH.One of these is that more profitable companies will need more external funding and will first seek debt financing in an asymmetric world,avoiding the equity market.

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Definitions:

Performance Management

The process of ensuring that an organization's resources are being used most efficiently to achieve its goals, including employee performance.

Validity

Validity refers to the degree to which a test, tool, or research accurately measures or evaluates what it is intended to measure or evaluate.

Rating Scale

A tool used for evaluating or assessing the performance, attitude, or characteristics of individuals or objects, typically ranging from low to high or poor to excellent.

Consistent Results

The achievement of uniform and predictable outcomes over a period of time, demonstrating stability and reliability in performance.