1 2 3 Transaction Redeemed debentures by issuing ordinary shares Purchased inventory on credit Sold inventory for cash with a 40 per cent mark-up on cost Ratio Return on equity Quick ratio Current ratio
1 2 3 Transaction Redeemed debentures by issuing ordinary shares Purchased inventory on credit Sold inventory for cash with a 40 per cent mark-up on cost Ratio Return on equity Quick ratio Current ratio
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Fad Foods Ltd completed a series of transactions, which are listed below. Before the transactions, both the current and quick asset ratios were greater than 1. The cash account has a debit balance. Indicate the effect of each of the transactions listed below on the ratio listed opposite it. For each transaction, state whether the ratio would increase, decrease or have no effect. Treat each transaction independently.
![Transaction
1 Redeemed debentures by issuing ordinary shares
2 Purchased inventory on credit
3
4
5
6
7
Sold inventory for cash with a 40 per cent mark-up on cost
Issued additional ordinary shares for cash
Collected an account receivable balance
Paid accounts payable
Paid accounts payable
Ratio
Return on equity
Quick ratio
Current ratio
Debt-to-equity ratio
Debtors turnover
Return on assets
Profit margin](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb8284ae0-afe1-4daf-9028-49f3617e0cc3%2F9728d743-70fb-4704-a4f3-05dccac2a482%2Fkrsuus_processed.png&w=3840&q=75)
Transcribed Image Text:Transaction
1 Redeemed debentures by issuing ordinary shares
2 Purchased inventory on credit
3
4
5
6
7
Sold inventory for cash with a 40 per cent mark-up on cost
Issued additional ordinary shares for cash
Collected an account receivable balance
Paid accounts payable
Paid accounts payable
Ratio
Return on equity
Quick ratio
Current ratio
Debt-to-equity ratio
Debtors turnover
Return on assets
Profit margin
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![Transaction
1 Redeemed debentures by issuing ordinary shares
2 Purchased inventory on credit
3
4
5
6
7
Sold inventory for cash with a 40 per cent mark-up on cost
Issued additional ordinary shares for cash
Collected an account receivable balance
Paid accounts payable
Paid accounts payable
Ratio
Return on equity
Quick ratio
Current ratio
Debt-to-equity ratio
Debtors turnover
Return on assets
Profit margin](https://content.bartleby.com/qna-images/question/b8284ae0-afe1-4daf-9028-49f3617e0cc3/54dc218f-3999-4d01-8c22-7c7ff2bd5e98/uutnoo8_thumbnail.png)
Transcribed Image Text:Transaction
1 Redeemed debentures by issuing ordinary shares
2 Purchased inventory on credit
3
4
5
6
7
Sold inventory for cash with a 40 per cent mark-up on cost
Issued additional ordinary shares for cash
Collected an account receivable balance
Paid accounts payable
Paid accounts payable
Ratio
Return on equity
Quick ratio
Current ratio
Debt-to-equity ratio
Debtors turnover
Return on assets
Profit margin
Solution
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