According to the Pecking-Order Theory,managers Will Often Choose to Finance

question 75

Multiple Choice

According to the pecking-order theory,managers will often choose to finance with:

• A) new equity rather than debt, due to bankruptcy costs.
• B) debt rather than new equity, to avoid a fall in the share price.
• C) debt rather than retained earnings, to lower the WACC.
• D) new equity rather than debt, to strengthen EPS.

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Definitions:

Short Run

A time period in economics during which at least one input is fixed while others are variable.

Produce

Fresh agricultural products such as fruits, vegetables, and other food crops that are grown and harvested.

At A Loss

A situation where expenses or costs exceed revenues, leading to a negative financial outcome for businesses or individuals.

Short Run

A time period in economics during which at least one input, such as equipment or labor, is fixed while others are variable, influencing decisions and behavior in production and pricing.