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:

Hung Juries

Jurors that are unable to reach a unanimous or legally required decision, resulting in a trial that does not conclude with a definitive verdict.

Evidence Driven

An approach that bases decisions, conclusions, or actions on empirical data and observed evidence rather than on intuition or opinion.

Crutchfield Situation

A procedure used in social psychology experiments to study conformity, where individuals must make judgments while being exposed to the purported judgments of others.

Asch Situation

A psychological experiment by Solomon Asch that demonstrates the power of conformity in small groups, where individuals often agree with an incorrect majority opinion on a clear task.