According to the "pecking order theory," firms prefer to issue securities first and then issue securities as a last resort.
A)equity, debt
B)debt, convertible debt
C)debt, equity
D)equity, convertible debt

Question

Quizplus · Accepted Answer

The pecking order theory states that firms prefer to issue debt first and then equity, with internal funds being the preferred source of financing. Therefore, the correct order would be debt followed by equity. Option A and D are incorrect because they suggest that firms prefer to issue equity first, which is not supported by the pecking order theory. Option B is also incorrect as convertible debt is a type of debt and would be issued before equity according to the pecking order theory.

According to the "Pecking Order Theory," Firms Prefer to Issue