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:

Valid Contract

An agreement that has met all legal requirements, making it enforceable by law.

Inter Vivos

A transaction between living persons.

Causa Mortis

A legal term referring to the transfer of property made by an individual in anticipation of imminent death.

Per Stirpes

A legal term referring to the equal distribution of an estate to heirs according to their deceased ancestor's share.