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:

Expert Power

The influence possessed by an individual due to their expertise, skills, or knowledge in a specific area.

Referent Power

A form of personal power that derives from the respect, admiration, and loyalty that others have towards an individual, leading them to be influenced by this person.

Formal Leadership

Leadership roles that are officially recognized within an organization, characterized by specific responsibilities and authority granted to individuals.

Position Power

The authority and influence an individual holds in an organization due to their rank or role within the hierarchy.