The Theory That Managers May Prefer Internal Sources of Funds

question 60

Multiple Choice

The theory that managers may prefer internal sources of funds to the lowest cost source of funds is known as

• A) the Modigliani and Miller Proposition.
• B) tradeoff theory.
• C) financial stress avoidance theory.
• D) pecking order theory.

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Definitions:

Sole Proprietorship

A business structure owned by a single individual, where there's no legal distinction between the owner and the business.

Liable

Legally responsible or obligated to face consequences, typically in the form of compensations or reparations.

Profits

Financial gains obtained after subtracting the costs, expenses, and taxes from a business's total revenue.

Employment Law

A branch of law that governs the rights and duties between employers and workers, covering areas such as wages, workplace safety, discrimination, and termination.