Under the Pecking Order Theory, Debt Is the Cheapest Source

question 73

True/False

Under the pecking order theory, debt is the cheapest source of funds due to the interest tax shield.

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Definitions:

Tender Offers

Public, open proposals by an entity or individual to purchase a substantial percentage of a company's shares or bonds at a specified price, often in an effort to gain control of the company.

Insider Trading

The illegal buying or selling of a publicly-traded company's stock by someone who has non-public, material information about that stock.

Tippees

Individuals who receive confidential information about a company and may use this information in trading company stocks or securities.

Officers

Individuals appointed by an organization’s board of directors who are responsible for the daily operation and management of the organization.