Pecking order theory

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February 27, 2017 at 2:27 pm #374557
salman7
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Dear sir,
1. I think the Pecking order theory is applicable for those companies which have already raised their capital and want to raise further capital as it starts with retained earnings.
2. The Pecking Order Theory does not meet the creditors hierarchy i.e., the most risky is share capital, followed by preferences shares, unsecured creditors and then at the end the secured creditors? or does it meet?
You comments needed.
Thanks,
February 27, 2017 at 2:51 pm #374568
John Moffat
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1. It is applicable to existing companies (obviously new companies have to raise share capital initially and don’t have retained earnings).
2. There is no connection to the creditors hierarchy. It is simply the idea that companies will raise finance in the easiest way.
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