Casey communications recently issue new common stock and used the proceeds to pa
ID: 2663003 • Letter: C
Question
Casey communications recently issue new common stock and used the proceeds to pay off some of its short-term notes payable. This action had no effect on the company’s total assets or operation income. Which of the following effects would occur as a result of this action?a) The company’s current ratio increased.
b) The company’s times interest earned ratio decreased
c) The company’s basic earning power ratio increased
d) The company’s equity multiplier increased
e) The company’s debit ratio increased
Explanation / Answer
Option A is correct. As a result of this action, company's current ratio increased when new stock issued and proceeds are used to pay short-term notes payable.