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 Number of days' sales in inventory Inventory turnover Earnings per share Debt ratio a. Purchased inventory on account. b. Sold inventory for cash, at a profit. C. Issued a 10% stock dividend. d. Issued common stock for cash. e. Sold land at a gain. f. Purchased treasury stock for cash. g. Accrued interest on a note payable. h. Accrued wages that have been earned by employees. i. Purchased equipment for cash. J. Issued bonds at an interest rate that is less than the company's ROI. Return on investment Debt/equity ratio Times interest earned Current ratio Plant and equipment turnover Return on equity

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
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.
b. Sold inventory for cash, at a profit.
C. Issued a 10% stock dividend.
Number of days' sales in inventory
Inventory turnover
Earnings per share
Debt ratio
d. Issued common stock for cash.
Return on investment
e. Sold land at a gain.
f. Purchased treasury stock for cash.
g. Accrued interest on a note payable.
h. Accrued wages that have been earned
by employees.
i. Purchased equipment for cash.
J. Issued bonds at an interest rate that is
less than the company's ROI.
Debt/equity ratio
Times interest earned
Current ratio
Plant and equipment turnover
Return on equity
Transcribed Image Text: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. b. Sold inventory for cash, at a profit. C. Issued a 10% stock dividend. Number of days' sales in inventory Inventory turnover Earnings per share Debt ratio d. Issued common stock for cash. Return on investment e. Sold land at a gain. f. Purchased treasury stock for cash. g. Accrued interest on a note payable. h. Accrued wages that have been earned by employees. i. Purchased equipment for cash. J. Issued bonds at an interest rate that is less than the company's ROI. Debt/equity ratio Times interest earned Current ratio Plant and equipment turnover Return on equity
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Vertical statement analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education