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