A survey of Fortune 500 firms indicate that they prefer internal financing (retained earnings) to external financing.This preference is known as .
A)financial slack
B)the pecking order theory
C)capital structure theory
D)asymmetric capital

Question

Quizplus · Accepted Answer

The preference for internal financing over external financing is known as the pecking order theory, which suggests that firms prioritize funding their investments with retained earnings, followed by debt, and then equity, due to the low cost of internal funds and the potential information asymmetry and high cost of external financing.

A Survey of Fortune 500 Firms Indicate That They Prefer