The Pecking Order States How Financing Should Be Raised

Multiple Choice

The pecking order states how financing should be raised. In order to avoid asymmetric information problems and misinterpretation of whether management is sending a signals on security overvaluation the firm's first rule is to:

A) finance with internally generated funds as there is no market interaction.
B) always issue debt then the market won't know when management thinks the security is overvalued.
C) reduce asymmetry before any financing activity.
D) increase the financial slack to reduce the reliance on internally generated funds.