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Lyrx [107]
2 years ago
12

What is the role of debt is the pecking order theory of capital structure? How does it differ under the stulz (1990) model?

Business
1 answer:
aleksandr82 [10.1K]2 years ago
4 0

The role of debt is the pecking order theory of capital structure are-

The pecking order theory states that a company should prefer to finance itself first internally through retained earnings. If this source of financing is unavailable, a company should then finance itself through debt. This pecking order is important because it signals to the public how the company is performing. An obvious implication of the pecking order theory is that highly profitable firms that generate high earnings are expected to use less debt capital than those that are not very profitable. So here the debt component will be minimal.

Hierarchy theory states that companies must first raise internal funds through retained earnings. If this source of funding is not available, companies will have to raise funds through debt. Finally, as a last resort, companies should raise capital by issuing new shares.

In hierarchy theory, companies prioritize their funding sources (from internal funding to equity) and view equity funding as a last resort. Internal funds are used first, and debt is used when they are exhausted. Equity is issued when issuing more bonds is unwise.

Learn more about debt here: brainly.com/question/24814852

#SPJ4

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Brody and tanya recently sold some land they owned for $200,000. they received the land five years ago as a wedding gift from br
Andrej [43]
When calculating the long term capital gain on the sale of the property, it is important to make sure adjustments are made from the original date of purchase and when the land was gifted. 

To solve:
Adjusted amount = Original purchase amount + (gift tax X difference in what the land was worth/original land worth amount)
Adjusted amount = $20,000 + ($40,000 X $80,000/$100,000)
Adjusted amount = $52,000

Land owned for $200,000
Adjust amount is $52,000

$200,000 - $52,000 = $148,000

The long-term capital gain on the property is $148,000.

5 0
3 years ago
McGraw purchased an antique rocking chair from Tillis by check. The check was dishonored by the bank due to insufficient funds.
LekaFEV [45]

Answer:

Option C is the correct option.

Explanation:

As the rights and obligation of the antique rocking chair are been passed to third party, so the damage caused by the checque been bounced is the monetry consideration agreed between the party to the contract, McGraw and Tellis. So Tellis may recover money damages from McGraw. However there is a special condition that can allow Tellis recover his asset from Rio if the third party knew before purchase of this asset, that the checque paid to Tellis by McGraw was dishonoured but still he contracted with McGraw to acquire the antique rocking chair.

Overall the option C is the correct option with which the case scenario relates.

3 0
2 years ago
Which statement below best captures the overall point and focus of the New York Times article, Document 3?
Artemon [7]

Answer:

Correct Answer:

C) The news story marks the historical event of the first black man being called up to play in the major leagues and expresses some concern over how Robinson will be treated by his major league peers.

Explanation:

<em>Option C ıs the best statement which captures the overall point and focus of the given New York Times article, Document 3.</em>

6 0
3 years ago
Twilight Company uses the aging of accounts receivable method to estimate Bad Debt Expense. The balance of each account receivab
AnnZ [28]

Answer:

a.                          Acct. receivable   % uncollectible   Est. uncollectible

1-30 days old           $63,000                      3%                    $1,890

31-90 days old         $12,000                      14%                   $1,680

> 90 days old           $5,000                       37%                  <u>$1,850</u>

                                                                   Total                   <u>$5,420</u>

b. Date   General journal                                         Debit    Credit

Dec 31    Bad debts expenses                                $5,150

                      Allowance for doubtful accounts                   $5,150

              ($5,420 - $270)

6 0
3 years ago
Which of the following is an example of a social career?
hichkok12 [17]
Nurse is an example of that
4 0
3 years ago
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