In order to enhance the wealth of stockholders and to send positive signals to the market,corporations generally raise funds using the following order
A) equity, retained earnings, debt.
B) debt, retained earnings, equity.
C) retained earnings, equity, debt.
D) retained earnings, debt, equity.

Question

Quizplus · Accepted Answer

Corporations typically prefer to use retained earnings first as it does not involve issuing new securities or incurring debt. If additional funds are needed, they prefer debt over equity because debt is usually cheaper and interest payments are tax-deductible. Issuing new equity is often the last resort as it can dilute existing shareholders' value.

In Order to Enhance the Wealth of Stockholders and to Send