Equity ratio based on the hypothesis

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A number of capital structure theories have been introduced to show that capital structure does matter in the presence of capital market frictions and imperfections: they are the trade-off theory, pecking order theory and market timing hypothesis. Providea concise summary on trade-off theory, pecking order theory and market timing hypothesis and explain how a firm decides its debt/equity ratio based on each of the hypothesis/theory mentioned.

Reference no: EM133069739

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