The pecking-order theory suggests that less profitable firms borrow more because:

Name: The pecking-order theory suggests that less profitable firms borrow more because:
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The pecking-order theory suggests that firms prefer to use internal funds to finance their investments. However, if internal funds are insufficient, firms turn to external sources of financing. Less profitable firms may have lower internal funds, thus they borrow more to finance their investments.

The Pecking-Order Theory Suggests That Less Profitable Firms Borrow More