1 Preferred stock ________. A. always has a legal and specific claim to a fixed amount (listed as a liability) B. reflects residual ownership of a company C. represents a preferential claim on dividends D. pays dividends which grow over time E. will be "paid" before the bondholders

2

Which of the following is FALSE about the Pecking Order Hypothesis?

A.

Firms which are most profitable will have a lot of debt in their capital structure.

B.

Firms prefer internal financing first.

C.

If external financing is required, firms will use equity as a last resort.

D.

If external financing is required, firms should first seek debt financing.

E.

Debt financing is less expensive than equity financing.