📈 CFA Exam Prep

The pecking order theory suggests firms prefer financing in what order?

A Equity, debt, retained earnings
B Internal funds first, then debt, then equity as a last resort
C Debt, equity, internal funds
D Any order equally

✓ Correct Answer: Option B

Pecking order: firms prefer internal financing, then debt, then equity (due to information asymmetry and costs).

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