Which of the following statements is correct?
A) The firm should finance using retained earnings, then debt, and, finally, common equity.
B) The firm should finance using debt, then retained earnings, and, finally, common equity..
C) The firm should finance using retained earnings, then debt, and, finally, common equity..

Question

Quizplus · Accepted Answer

The firm should finance using retained earnings, then debt, and, finally, common equity because retained earnings are the cheapest source of financing, followed by debt, and then common equity.

Which of the Following Statements Is Correct