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      Question

      In corporate finance, what is the 'pecking order

      theory'?
      A Firms do not pay dividends to preserve cash. Correct Answer Incorrect Answer
      B Firms equally mix equity and debt to balance risk. Correct Answer Incorrect Answer
      C Firms prefer equity over debt for financing. Correct Answer Incorrect Answer
      D Firms prefer internal financing first, then debt, and only issue equity as a last resort, Correct Answer Incorrect Answer

      Solution

      The correct answer is D

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