Hens Inc. has a total debt ratio of 60%, which is slightly above the industry average total debt ratio of 55% . Hens Inc. decides to follow only pecking order theory when deciding how to raise capital to pay for new projects, so they should

Multiple Choice

• use equity to get closer to the optimal capital structure then issue additional debt if necessary.

• use internal financing prior to external financing.

• use short-term debt to its maximum available limit prior to issuing long-term debt.

• issue convertible debt and buy assets to reduce their total debt ratio in order to be closer to the optimal level of debt.

• issue equity while maintainng reserve borrowing capacity.