Question

According to the "pecking =-order theory" proposed by Stewart Myers of MIT, which of the following...

According to the "pecking =-order theory" proposed by Stewart Myers of MIT, which of the following is/are correct?

1. For financing needs, firms prefer to first tap internal resources such as retained earnings, profits and excess cash

2. There is an inverse relationship between a firm's profit level and its debt level

3. Firms prefer to issue new equity rather than source external debt.

4. A firms capital structure is dictated by its need for external financing

1. 1 and 3 only

2. 2 and 4 only

3. 1, 3, and 4 only

4. 1, 2, and 4 only

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