The Pecking Order Theory of Capital Structure Implies That

question 28

Multiple Choice

The pecking order theory of capital structure implies that

• A)high-risk firms will end up borrowing more.
• B)firms prefer internal finance.
• C)firms prefer internal finance and firms prefer debt to equity when external financing is required.
• D)firms prefer debt to equity when external financing is required.

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Definitions:

Personalities

The combination of characteristics or qualities forming an individual's distinctive character, often influencing their behavior and reactions.

Situation

The set of environmental and contextual factors present at a certain time and location.

Downward Comparison

A comparison of oneself with those who are worse off.

Upward Comparison

A comparison of oneself with those who are better off.