Ask Question
BusinessBusiness
8 May, 00:34

According to the pecking order theory:

New debt is preferable to new equity.

New equity is preferable to internally generated funds.

New debt is preferable to internally generated funds.

New equity is always preferable to other sources of capital.

+2
Answers (1)
  1. 8 May, 02:55
    0
    Answer: New debt is preferable to new equity

    Explanation: In simple words, pecking order theory refers to the corporate finance phenomenon which states that managers of a company finance their company on the basis of three sources and always prefers one over the other.

    As per this theory the first preference for the manager is retained earnings, second option should be debt and the last resort should be equity. A manager following pecking order theory focuses on decreasing the risk of financing rather than the cost of capital.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “According to the pecking order theory: New debt is preferable to new equity. New equity is preferable to internally generated funds. New ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
This is an economic system where the government controls the major means of production but property and other businesses may be privately owned.
Answers (1)
DuBois, Inc. announces a large stock dividend of 65% of the 4.96 million outstanding shares of common stock. The current price per share is $13.85. Par value of the stock is $0.01 per share.
Answers (1)
A company reports the following income statement and balance sheet information for the current year: Net income $250,000 Interest expense 100,000 Average total assets 2,500,000 Determine the return on total assets.
Answers (1)
Why is a company's sales budget developed before the production budget? a : the company needs to find ways to sell as many units as it can maximally produce. b : the company only wants to produce as many units as it expects to sell.
Answers (1)
Elkins, a manufacturer of ice makers, realizes a cost of $250 for every unit it produces. Its total fixed costs equal $5 million.
Answers (1)
New Questions in Business
When a person is reconciling a checking account and notices that the balance in the checkbook does not match the balance on the statement from the bank, which action is it appropriate for the person to take first?
Answers (1)
The government of Happyland collects $100 million in taxes each year and currently has a public debt of $1.2 billion, which it finances by issuing Treasury bonds that pay 8% per year.
Answers (1)
Weaver Chocolate Co. expects to earn $3.50 per share during the current year, its expected dividend payout ratio is 65%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $32.50 per share.
Answers (1)
GANTT refers to the Generalized Activity Network Tracking Technique which was developed to better understand how variability in the duration of individual activities impacts the expected project duration. a. trueb. false
Answers (1)
A firm based in a country with a national competitive advantage is not guaranteed success as it implements its chosen international business-level strategy.
Answers (1)
Home » Business » According to the pecking order theory: New debt is preferable to new equity. New equity is preferable to internally generated funds. New debt is preferable to internally generated funds. New equity is always preferable to other sources of capital.
Sign Up Forgot Password?