Based on your understanding of the capital structure theories, identify the best option for the missing part of the statement. Several dominant theories try to explain why financial managers make the capital structure decisions that they do. The following statement describes one such theory. Consider this case: The firm's debt-equity decision finds the optimal balance between the interest tax shield benefits of debt financing and the costs of financial distress associated with issuing debt. Identify which of the two theories is described by the statement. Pecking-order hypothesis Trade-off theory