1- Describe the order of financial sources for managers who subscribe to the pecking order theory of financing.

Evaluate that order by observing the costs of each source relative to the costs of other sources.

2- Why can the market price of a stock differ from its true (intrinsic) value?

3- Why are common stockholders considered to be more at risk than the holders of other types of securities?

4- Two publicly traded companies in the same industry are similar in all respects except one. Whereas firm A

has issued debt in the public markets (bonds), firm B has never borrowed from any public source. In fact, firm

B always uses private bank debt for its borrowing. Which firm is likely to have a more aggressive regular

dividend payout? Explain.

5- Explain what a negative cash conversion cycle means.

6- Discuss the benefits and costs of using debt financing?

7- What are the benefits associated with dividends?