Moving from one source of funding to another in a particular order is called the ________.
A)Pecking Order Hypothesis
B)Barnyard Order Hypothesis
C)Funding Order Hypothesis
D)Capital Market Hypothesis

Question

Quizplus · Accepted Answer

The Pecking Order Hypothesis states that firms prefer to finance their investments through retained earnings first, followed by debt, and equity as a last resort. This order is based on the idea that internal funding (retained earnings) is cheaper than external financing (debt and equity), and taking on debt and equity can signal that the firm does not have profitable investment opportunities. The other answer choices are not relevant or accurate in describing the concept of moving from one source of funding to another.

Moving from One Source of Funding to Another in a Particular