The Cavendish Company recently issued new common stock and used the proceeds to pay off some...
The Cavendish Company recently issued 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 operating income. Which of the following effects would occur as a result of this action? Group of answer choices The company's current ratio increased. The company's times interest earned ratio decreased. The company's debt ratio increased. The company's equity multiplier increased.
Homework Answers
Answer: The correct answer is "the company's current ratio increased".
Given that, the company paid off some of its short term notes payable, this means the current liabilities reduced to some extent.
Current ratio=Current assets/Current liabilities
When current liabilities reduced, the current ratio value
increased
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The Cavendish Company recently issued new common stock and used
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