Financial theory suggests and empirical evidence supports the idea that firms have a”pecking order” by which...
Financial theory suggests and empirical evidence supports the idea that firms have a”pecking order” by which they choose to raise funds to finance assets. From the first source of financing to the last this pecking order is ______.
a. internally generated funds, debt, and new equity
b. debt, internally generated funds, and equity
c. equity, debt, and internally generated funds
d. None of the above, there is no such preference
Homework Answers
Answer: a : internally generated funds, debt & new equity
According to pecking order theory, firm first uses internally generated funds for expansion. then if more money is required, firm will go for debt, debt is cheaper than the new equity. (THUMBS UP PLEASE)
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