Indicate by letter whther the action listed will immediatelyh Increase (I), Decr
ID: 2374359 • Letter: I
Question
Indicate by letter whther the action listed will immediatelyh Increase (I), Decrease (D), or have noe effect (N) on the ratios shown in the table. Assume each ratio is less than 1.0 before the action was taken.
Action Current Ratio Acid Test Ratio Debt to Equity Ratio
1. Issuance of Long Term Bonds
2. Issuane of Short Term Notes
3. Payment of Accounts Payable
4. Purchase of Inventory on Account
5. Purchase of Inventory for Cash
6. Purchase of Equipment with 4-year Note
7. Retirement of Bonds
8. Sale of Common Stock
9. Write off of Obsolete Inventory
10. Purchase of Short Term Investment for Cash
11. Decision to Refinance on a long term basis some currently maturity of debt
Explanation / Answer
current ratio acid ratio debt-equity ratio
1. no effect no effect increase
2. decrease decrease no effect
3. increase increase no effect
4. no effect no effect no effect
5. increase decrease no effect
6. no effect no effect no effect
7. no effect no effect decrease
8.decrease increase no effect
9. no effect no effect no effect
10. increase increase no effect
11. no effect no effect increase