There are three questions that draw from Chapters 4 to 6 in the book. The exam is open book/notes/internet. Please answer each of the following using

approximately 1 to 2 pages per answer.

1. Explain the concept of "financial leverage". What it is, what it impacts and how firms go about deciding how to optimize their leverage. You can use

examples from the practice problems and book as well as other information and examples available on the web or other sources.

2. Evaluate the statement "no one can consistently beat the market". [market efficiency)

3. Describe a firm's "sustainable growth rate". How can a company have too much cash and what does it do with the cash? How can a company have a

shortage of cash and what can it do to alleviate this challenge?