Which of the following statements generally gives the correct order in which management choose amongst alternatives to finance projects?
A)(1)Retained earnings;(2)ordinary shares;(3)debt;and (4)convertible debt
B)(1)Retained earnings;(2)debt;(3)convertible debt;and (4)ordinary shares
C)(1)Retained earnings;(2)convertible debt;(3)ordinary shares;and (4)debt
D)(1)Convertible debt;(2)ordinary shares;(3)debt;and (4)retained earnings

Question

Quizplus · Accepted Answer

Management generally prefers financing projects through retained earnings first, followed by debt and then convertible debt. Ordinarily shares are usually considered as a last resort because they represent ownership in the company and involve sharing profits with shareholders. Therefore, the correct order is (1)Retained earnings;(2)debt;(3)convertible debt;and (4)ordinary shares, which is consistent with choice B.

Which of the Following Statements Generally Gives the Correct Order