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Questions and Answers
Which theory emphasizes the importance of rationality and the reduction of asymmetric information between management and shareholders?
Which theory emphasizes the importance of rationality and the reduction of asymmetric information between management and shareholders?
- Value irrelevance theory
- Pecking Order
- Trade off
- Agency Theory (correct)
What does market timing theory suggest firms should do when their share price is overvalued?
What does market timing theory suggest firms should do when their share price is overvalued?
- Repurchase stock (correct)
- Issues new stock
- Increase debt
- Decrease debt
What is the main focus of capital structure theories?
What is the main focus of capital structure theories?
- Interest rates
- Debt and equity balance (correct)
- Market trends
- Fluctuations in stock price
Which version of the market timing theory suggests that managers issue equity when the cost of equity is low?
Which version of the market timing theory suggests that managers issue equity when the cost of equity is low?
What does the pecking order theory suggest firms should do when market interest rates are low?
What does the pecking order theory suggest firms should do when market interest rates are low?
Match the following concepts with their descriptions:
Match the following concepts with their descriptions:
Match the following actions with the responsible party:
Match the following actions with the responsible party:
Match the following theories with their main focus:
Match the following theories with their main focus:
Match the following roles with the associated costs:
Match the following roles with the associated costs:
Match the following obligations with the responsible party:
Match the following obligations with the responsible party:
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