Which of the Following Are Correct According to Pecking-Order Theory

question 86

Multiple Choice

Which of the following are correct according to pecking-order theory?
I.Firms stockpile internally-generated cash.
II.There is an inverse relationship between a firm's profit level and its debt level.
III.Firms avoid external debt at all costs.
IV.A firm's capital structure is dictated by its need for external financing.

• A)I and III only
• B)II and IV only
• C)I, III, and IV only
• D)I, II, and IV only
• E)I, II, III, and IV

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Definitions:

Inertia

A tendency for people to stick with an existing or previous decision, avoiding change or action.

Message-Response Involvement

The degree of cognitive and emotional engagement an individual experiences in response to a communication message.

Securities Rules

Regulatory guidelines established to govern the trading, offering, and selling of securities to protect investors and ensure market integrity.

Electronic Messages

Communications transmitted through electronic means, such as email, instant messaging, and text messaging.