The pecking order explanation of capital structure states that a hierarchy of financing exists for firms, in which new external debt financing is employed first, followed by retained earnings and finally by external equity financing

The assets of a Holding Company are (mostly) operating companies

a. true b. false

Which of the following statements is incorrect?

a. Transaction exposure represents only the exchange rate risk when converting net foreign cash inflows to U.S. dollars or when purchasing foreign currencies to send payments. b. Economic exposure represents any impact of exchange rate fluctuations on a firm's future cash flows. c. Firms can simply focus on hedging their foreign currency payables and/or receivables to hedge economic exposure. d. The management of economic exposure tends to serve as a long-term solution rather than just a short-term solution.