The Pecking Order States How Financing Should Be Raised

question 14

Multiple Choice

The pecking order states how financing should be raised.In order to avoid asymmetric information problems and misinterpretation of whether management is sending a signal on security overvaluation the firm's first rule is to:

• A)issue new equity first.
• B)always issue debt then the market won't know when management thinks the security is overvalued.
• C)finance with internally generated funds.
• D)issue debt first.
• E)None of the above.

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Definitions:

Resource Partitioning

The process by which competing species use the environment differently in a way that helps them to coexist.

Competitive Exclusion

A principle in ecology that states two species competing for the same limited resource cannot coexist at constant population values, one will always outcompete the other.

Competition

The interaction between organisms or species, where the fitness of one is lowered by the presence of another.

Commensalism

A type of symbiotic relationship where one organism benefits from the association while the other is neither benefited nor harmed.