1. What is the optimal growth rate for a company with access to external capital?

Internal growth rate

External growth rate

Sustainable growth rate

Cannot be determined

2. What is the annual depreciation tax shield provided by a piece of equipment that costs $150,000 and is depreciated on a straight-line basis over 10 years? Assume a tax rate of 35%.

$15,000

$1,500

$5,250

$9,750

3. Which of the following is not a use of funds in a statement of sources and uses?

Increase in long-term debt

Increase in the cash account

Reduction in accounts payable

Increase in accounts receivable

4. Which of the following common ratios measures leverage?

Current ratio

Times interest earned

Receivables turnover

None of the above

5. Which of the following common base items are used to create common-size income statements and balance sheets, respectively?

Sales and total assets

Sales and total liabilities

Operating income and total assets

Net income and total equity