why does an increase in the ratio of current assets to total assets decrease both profits...
why does an increase in the ratio of current assets to total assets decrease both profits and risk as measured by net working capital
Homework Answers
An increase in current assets will reduce profits since fixed assets are assumed to be generate more profits than current assets. Also, having more current assets improves the liquidity position of the business and hence the risk reduces assuming no change in current liabilities as measured by net working capital.
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why does an increase in the ratio of current assets to total assets decrease both profits...
Determine the effect on the current ratio, quick ratio, net working capital (current assets minus current...
Determine the effect on the current ratio, quick ratio, net working capital (current assets minus current liabilities), the debt ratio (total liabilities to total assets) of each of the following transactions. Consider each transaction seperately and assume that prior to each transaction the current ratio is 1.8x, the quick ratio is 1.5x, and the debt ratio is 75%. Think about what is included in each portion of the ratio. Use "I" for increase, "D" for decrease, and "N" for no...
Debits O increase both assets and liabilities. decrease both assets and liabilities. decrease assets and increase...
Debits O increase both assets and liabilities. decrease both assets and liabilities. decrease assets and increase liabilities. O increase assets and decrease liabilities.
Debits O increase both assets and liabilities. decrease both assets and liabilities. decrease assets and increase...
Debits O increase both assets and liabilities. decrease both assets and liabilities. decrease assets and increase liabilities. O increase assets and decrease liabilities.
assets Total current liabilities Debt Ratio C. Debt ratio -the proportion of a company's assets financed...
assets Total current liabilities Debt Ratio C. Debt ratio -the proportion of a company's assets financed with debt. Debt ratio = Total Liabilities Total Assets D How transactions affect the ratios Given the following balances: Current Assets $150,000 Current Liabilities 75,000 Total Assets Total Liabilities 300,000 120,000 1. What is net working capital? 2. What are the current and debt ratios? 3. How would the following transactions affect the current ratio & the debt ratio (Improve, Deteriorate, No Change)? a....
Chapter 2 - Ratio Analysis 2014 $ 54,000 Current assets Total assets Current liabilities Total liabilities...
Chapter 2 - Ratio Analysis 2014 $ 54,000 Current assets Total assets Current liabilities Total liabilities Net income Net cash provided by operating activities Preferred dividends Common dividends Expenditures on property, plant, and equipment 22.000 72.000 80,000 90.000 6.000 3,000 27.000 2013 S 36,000 205.000 30.000 100.000 40,000 56,000 6,000 1.500 12.000 Shares outstanding at beginning of year. Shares outstanding at end of year 40.000 75,000 30,000 40,000 Compute the following: EPS Working capital Current Ratio Debt to assets ratio...
A firm's long-term assets = $100,000, total assets = $400,000, inventory = $50,000 and current liabilities...
A firm's long-term assets = $100,000, total assets = $400,000, inventory = $50,000 and current liabilities = $200,000. The industry average current ratio is 2.0 and quick ratio is 1.5. (3 points each) 7.1 What are the firm's current ratio and quick ratio? 7.2 What is the firm's liquidity position? 7.3 What is the firm's net working capital? 7.4 Why is working capital important to a business?
Q. A company with $65500 in current assets and $37000 in current liabilities pays a $1900...
Q. A company with $65500 in current assets and $37000 in current liabilities pays a $1900 current liability. As a result of this transaction, the current ratio and working capital will increase and remain the same, respectively. both decrease. both increase. remain the same and decrease, respectively.
An increase in accumulated depreciation increases total assets decreases total assets decreases the current ratio increases...
An increase in accumulated depreciation increases total assets decreases total assets decreases the current ratio increases the quick ratio Question 8 2 pts Depreciation is an expense that does not use cash during the period in which it is recognized When and win the cathotto associated with the asset occur? When the asset is retired There is no cash outflow associated with depreciation or the asset! When the replacement cost of the asset increases When the asset was acquired
1- which one of the following is not included in net working capital? A) account receivable...
1- which one of the following is not included in net working capital? A) account receivable , B) retained earnings, C) cash and cash equivalent , D) prepaid expenses, E) Account payable. 2- Depreciation does which one of the following for a profitable firm? A) has no effect on net income, B) decrease net working capital, C) decrease net income, D) increase net income, E) increase taxes 3- a firm has a current ratio 0.9, given this you know for...
NI+D+L-G Saffordville Co. Cash Flow Statement (Inderect Method) Current Assets Increase Current Assets Decrease Decrease Increase...
NI+D+L-G Saffordville Co. Cash Flow Statement (Inderect Method) Current Assets Increase Current Assets Decrease Decrease Increase Need Help Completing the Cash Flow of Statement Assets Cash A/R Inventory Investments Equipment Accumulated Derp.-Equipment Total Liabilities and Stockholders' Equity 2020 77,700 60,800 126,900 79,500 315,000 (44,500) 615,400 2019 33,400 447,000 92,650 107,000 205,000 (40,000) 845,050 112,660 Current Liabilities Increase Increase Current Liabilities Decrease Decrease Cah flows from operating activities Net Income Add: Decrease in Accounts Receivables Increase in A/P A/P 48,280 18,830...
Debits O increase both assets and liabilities. decrease both assets and liabilities. decrease assets and increase liabilities. O increase assets and decrease liabilities.
Debits O increase both assets and liabilities. decrease both assets and liabilities. decrease assets and increase liabilities. O increase assets and decrease liabilities.
assets Total current liabilities Debt Ratio C. Debt ratio -the proportion of a company's assets financed with debt. Debt ratio = Total Liabilities Total Assets D How transactions affect the ratios Given the following balances: Current Assets $150,000 Current Liabilities 75,000 Total Assets Total Liabilities 300,000 120,000 1. What is net working capital? 2. What are the current and debt ratios? 3. How would the following transactions affect the current ratio & the debt ratio (Improve, Deteriorate, No Change)? a....
Chapter 2 - Ratio Analysis 2014 $ 54,000 Current assets Total assets Current liabilities Total liabilities Net income Net cash provided by operating activities Preferred dividends Common dividends Expenditures on property, plant, and equipment 22.000 72.000 80,000 90.000 6.000 3,000 27.000 2013 S 36,000 205.000 30.000 100.000 40,000 56,000 6,000 1.500 12.000 Shares outstanding at beginning of year. Shares outstanding at end of year 40.000 75,000 30,000 40,000 Compute the following: EPS Working capital Current Ratio Debt to assets ratio...
A firm's long-term assets = $100,000, total assets = $400,000, inventory = $50,000 and current liabilities = $200,000. The industry average current ratio is 2.0 and quick ratio is 1.5. (3 points each) 7.1 What are the firm's current ratio and quick ratio? 7.2 What is the firm's liquidity position? 7.3 What is the firm's net working capital? 7.4 Why is working capital important to a business?
An increase in accumulated depreciation increases total assets decreases total assets decreases the current ratio increases the quick ratio Question 8 2 pts Depreciation is an expense that does not use cash during the period in which it is recognized When and win the cathotto associated with the asset occur? When the asset is retired There is no cash outflow associated with depreciation or the asset! When the replacement cost of the asset increases When the asset was acquired
NI+D+L-G Saffordville Co. Cash Flow Statement (Inderect Method) Current Assets Increase Current Assets Decrease Decrease Increase Need Help Completing the Cash Flow of Statement Assets Cash A/R Inventory Investments Equipment Accumulated Derp.-Equipment Total Liabilities and Stockholders' Equity 2020 77,700 60,800 126,900 79,500 315,000 (44,500) 615,400 2019 33,400 447,000 92,650 107,000 205,000 (40,000) 845,050 112,660 Current Liabilities Increase Increase Current Liabilities Decrease Decrease Cah flows from operating activities Net Income Add: Decrease in Accounts Receivables Increase in A/P A/P 48,280 18,830...
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