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 signal on security overvaluation the firm's first rule is to:

A) issue convertible debt prior to straight debt to save funds.
B) use short-term debt to its maximum available limit prior to issuing long-term debt.
C) issue new equity first in order to retain internal funds and avoid interest costs.
D) issue new debt prior to new equity.
E) use internal financing prior to external financing.