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16 November, 20:26

According to the pecking order theory:

New debt is preferable to new equity.

New equity is preferable to internally generated funds.

New debt is preferable to internally generated funds.

New equity is always preferable to other sources of capital.

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  1. 16 November, 20:47
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    Answer: New debt is preferable to new equity

    Explanation: In simple words, pecking order theory refers to the corporate finance phenomenon which states that managers of a company finance their company on the basis of three sources and always prefers one over the other.

    As per this theory the first preference for the manager is retained earnings, second option should be debt and the last resort should be equity. A manager following pecking order theory focuses on decreasing the risk of financing rather than the cost of capital.
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Home » Business » According to the pecking order theory: New debt is preferable to new equity. New equity is preferable to internally generated funds. New debt is preferable to internally generated funds. New equity is always preferable to other sources of capital.
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