1) Optimal capital structure is:
a. the mix of permanent sources of funds used by the firm in a manner that will maximize the company's common stock price.
b. the mix of all items that appear on the right-hand side of the company's balance sheet.
c. the mix of funds that will minimize the firm's beta.
d. the mix of securities that will maximize EPS.

2) Holding all other variables constant, which of the following will decrease total equity? An increase in:
a) common stock issued
b) dividends paid
c) net income
d)interest expense

3)Which of the following are considered to be spontaneous sources of financing (i.e., they arise naturally during the course of doing business)?
a. Notes payable and common stock
b. Accounts receivable and bonds
c. Fixed assets and inventory
d. Accounts payable and accrued expenses