The Pecking Order Explanation of Capital Structure States That a Hierarchy

question 192

True/False

The pecking order explanation of capital structure states that a hierarchy of financing exists for firms, in which retained earnings are employed first, followed by debt financing and finally by external equity financing.

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Definitions:

Hastert Rule

A political practice in the United States by which the Speaker of the House of Representatives will not bring a bill to the floor unless a majority of the majority party supports the bill.

Speaker of the House

The presiding officer of the United States House of Representatives, responsible for leading the House's legislative agenda and representing its members.

Checks and Balances

A fundamental principle of government that establishes a division of power among different branches to ensure that no single branch becomes too powerful, enabling mutual regulation.

Congressional Power

The authorities and duties given to the United States Congress, including making laws, declaring war, and regulating interstate and foreign commerce.