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26. Leverage measures Most financial managers measure debt ratios from their companies' book balance sheets. Many financial economists emphasize ratios from market-value balance sheets.

26. Leverage measures Most financial managers measure debt ratios from their companies' book balance sheets. Many financial economists emphasize ratios from market-value balance sheets. Which is the right measure in principle? Does the trade-off theory propose to explain book or market leverage? How about the pecking-order theory?

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