Effect of transactions on various financial ratios Indicate the effect that each transaction/event listed here will have on the financial ratio listed opposite it, and provide an explanation for your answer. Use + for increase, - for decrease, and(NE) for no effect. Assume that current assets exceed current liabilities in all cases, both before and after the transaction/event.
| Transaction/Event | Financial Ratio |
a. | Purchased inventory on account. | Number of days’ sales in inventory |
b. | Sold inventory for cash, at a profit. | Inventory turnover |
c. | Issued a 10% stock dividend. | Earnings per share |
d. | Issued common stock for cash. | Debt ratio |
e. | Sold land at a gain. | Return on investment |
f. | Purchased treasury stock for cash. | Debt/equity ratio |
g. | Accrued interest on a note payable. | Times interest earned |
h. | Accrued wages that have been earned by employees. | Current ratio |
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i. | Purchased equipment for cash. | Plant and equipment turnover |
j | 1ssued bonds at an interest rate that is less than the company’s ROI. | Return on equity |
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