Question

ION wVAal transactona often hive a gnhoant pait en hs w Uee Lfor Increase, 0 for decrease, and N for no chanae he deectNon of uch an mpad 1S POINTS) No. Delti Debi Ralle Interest Coverage Ratie Transaction hato Aurchase et buildings fnanced by moitgeu a. Sale of comvnon stock Repayment of long-term bank loan Conversion of bonds to common slock C. Declaration and payment of eash dividend Declaration and distribution of stock dividend.

Answer 1

Impact on Ratios Times Interest Earned Debt Debt/Equity Ratio Ratio N Ratio Transaction a. Purchase of buildings financed by mortgage. b.Sale of common stock c.Repayment of long-term bank loan d.Conversion of bonds to common stock e.Declaration and payment of cash dividend. f.Declaration and payment of stock dividend. Z-OOO- N N a. This would increase interest payments thus TIE would decrease.Debt would increase thereby increasing Debt ratio and Debt Equity ratio. b.This will not affect TIE, Increase in Equity will decrease debt ratio and Debt Equity ratio as cash increase on asset side and Equity increases in shareholders equity. c.Decrease in loan will decrease in interest payments thereby increasing TIE.Decrease in debt will decrease Debt ratio and Debt Equity ratio. d.Decrease in Interest Payments will increase TIE,Decrease in Debt will decrease in Debt ratio and Debt Equity Ratio. e.Cash Dividends will not effect TIE, but Dividend payable will increase debt ratio and Debt Equity ratio. f.Ther will no change in any ratio.