Which Form of Financing Do Firms Prefer to Use First

question 89

Multiple Choice

Which form of financing do firms prefer to use first according to the pecking-order theory?

• A)regular debt
• B)convertible debt
• C)common stock
• D)preferred stock
• E)internal funds

---

Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may not be collectible.

Mutual Agency

A principle in partnership where each partner is both an agent and a principal to the partnership, authorized to bind the partnership in contracts and agreements.

Partnership Business

A business structure in which two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Agreement.

Ease of Formation

Refers to the simplicity and low barriers to legally establishing and starting a new business entity.