Quiz Ch 13 – T/F Signaling Theory and Capital Structure Choice

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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True or false: In line with the signaling theory of capital structure, firms initially opt for common equity, resorting to debt only if raising more equity on "reasonable" terms becomes unfeasible. Debt usage signifies to investors that the firm's managers are concerned about an unfavorable future outlook.

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