Following A Financing Hierarchy

There is evidence that firms follow a financing hierarchy: retained earnings are the most preferred choice for financing, followed by debt, new equity, common and preferred; convertible preferred is the least preferred choice. For instance, in the survey by Pinegar and Wilbricht (Table 7.10), managers were asked to rank six different sources of financing -internal equity, external equity, external debt, preferred stock, and hybrids (convertible debt and preferred stock)- from most preferred to least preferred.

Table 7.10: Survey Results on Planning Principles

Ranking l 2

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  • s
    What would be the least preferred choice for financing?
    8 years ago

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