Firms Follow the "Pecking Order" in Their Long-Term Financing Because

question 18

Multiple Choice

Firms follow the "pecking order" in their long-term financing because:

• A) internally generated funds are the cheapest source of financing.
• B) outsiders will know less about the company and reduce the threat of any takeover.
• C) other financial strategies create more agency problems.
• D) firms prefer to issue safe securities with less valuation risk first.

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Definitions:

Annual Dividend

The total dividend payments a company makes to its shareholders in one fiscal year.

Constant Rate

A fixed percentage or value that does not change over time.

Share

A unit of ownership in a company or financial asset, representing a portion of the total capital.

Annual Dividend

The total dividend payment a company distributes to its shareholders in a single fiscal year.