Consider the following transactions for Giggly Care. Payment of dividends $1,250 Fees earned $4,500 Payment of...
Consider the following transactions for Giggly Care.
| Payment of dividends | $1,250 |
| Fees earned | $4,500 |
| Payment of expenses | $2,750 |
Which of the following shows the effect of these transactions on
the liquidity metric and the profitability metric of the
company?
a.A decrease of $500 in the liquidity metric and an increase of $1,750 in the profitability metric
b.An increase of $500 in the liquidity metric and an increase of $1,750 in the profitability metric
c.An increase of $500 in the liquidity metric and a decrease of $1,750 in the profitability metric
d.An increase of $1,750 in the liquidity metric and a decrease of $500 in the profitability metric
Homework Answers
Fees Earned =$4500
Payment of expense =$2750
Profit =4500-2750=$1750
Profitability metric is increased by $1750
Out of $1750 Profit , dividend paid =$1250
Increase in liquidity metric=1750-1250=$500
ANSWER:
b.An increase of $500 in the liquidity metric and an increase of $1,750 in the profitability metric
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