QUESTION 23 1. The pecking order theory of capital structure is based on the asy

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QUESTION 23 1. The pecking order theory of capital structure is based on the asymmetric information theory that the announcement of a stock offering by a mature firm is taken as a signal that the firm's prospects as seen by its management are not bright. True False 1 points   
QUESTION 24 1. One implication of the pecking order theory of capital structure is that profitable firms have more debt because they don't need outside money. True False QUESTION 23 1. The pecking order theory of capital structure is based on the asymmetric information theory that the announcement of a stock offering by a mature firm is taken as a signal that the firm's prospects as seen by its management are not bright. True False 1 points   
QUESTION 24 1. One implication of the pecking order theory of capital structure is that profitable firms have more debt because they don't need outside money. True False QUESTION 23 1. The pecking order theory of capital structure is based on the asymmetric information theory that the announcement of a stock offering by a mature firm is taken as a signal that the firm's prospects as seen by its management are not bright. True False 1 points   
QUESTION 24 1. One implication of the pecking order theory of capital structure is that profitable firms have more debt because they don't need outside money. True False

Explanation / Answer

QUESTION 23

The pecking order theory of capital structure is based on the asymmetric information theory that the announcement of a stock offering by a mature firm is taken as a signal that the firm's prospects as seen by its management are not bright.

True

QUESTION 24

1. One implication of the pecking order theory of capital structure is that profitable firms have more debt because they don't need outside money.

True

Under the pecking theory : The presence of flotation costs and asymmetric information may cause a firm to raise capital according to a pecking order:

The order stated that reinvesting net income, selling short-term marketable securities, issuing debt, preferred stock, and then only as a last resort will the firm issue common stock.

so when company issues stock it is taken as negative signal. and when debt is issued, it indicates no outside money is required

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