Which of the following statement/s accurately describe/s the nature and/or impact of the pecking order theory of capital structure? a) Firms are reluctant to issue equity because of the positive signal that sends about the firm's future prospects. b) Firms that have been more profitable in the past are less likely to have to raise debt capital and hence will be more likely to have lower debt levels. c) The theory relies, in part, on the assumption that investors know just as much about the firm's future prospects as the managers do. d) More than one of the above statements are correct.
Which of the following statement/s accurately describe/s the nature and/or impact of the pecking order theory of capital structure? a) Firms are reluctant to issue equity because of the positive signal that sends about the firm's future prospects. b) Firms that have been more profitable in the past are less likely to have to raise debt capital and hence will be more likely to have lower debt levels. c) The theory relies, in part, on the assumption that investors know just as much about the firm's future prospects as the managers do. d) More than one of the above statements are correct.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Which of the following statement/s accurately describe/s the nature and/or impact of
the pecking order theory of capital structure?
a) Firms are reluctant to issue equity because of the positive signal that sends about the
firm's future prospects.
b) Firms that have been more profitable in the past are less likely to have to raise debt
capital and hence will be more likely to have lower debt levels.
c) The theory relies, in part, on the assumption that investors know just as much about
the firm's future prospects as the managers do.
d) More than one of the above statements are correct.
e) None of the above statements are correct.
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