Most decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the actions listed below will immediately increase (1), decrease (D), or have no effect (N) on the ratios shown. Assume each ratio is less than 1.0 before the action is taken. 1. Issuance of long-term bonds 2. Issuance of short-term notes 3. Payment of accounts payable. 4. Purchase of inventory on account Action 5. Purchase of inventory for cash 6. Purchase of equipment with a 4-year note 7. Repayment of long-term notes payable 8. Issuance of common stock 9. Payment for advertising expense 10. Purchase of short-term investment for cash 11. Reclassification of long-term notes payable to current notes payable Current Ratio Acid-Test Ratio Debt to Equity Ratio
Most decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the actions listed below will immediately increase (1), decrease (D), or have no effect (N) on the ratios shown. Assume each ratio is less than 1.0 before the action is taken. 1. Issuance of long-term bonds 2. Issuance of short-term notes 3. Payment of accounts payable. 4. Purchase of inventory on account Action 5. Purchase of inventory for cash 6. Purchase of equipment with a 4-year note 7. Repayment of long-term notes payable 8. Issuance of common stock 9. Payment for advertising expense 10. Purchase of short-term investment for cash 11. Reclassification of long-term notes payable to current notes payable Current Ratio Acid-Test Ratio Debt to Equity Ratio
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Most decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the
actions listed below will immediately increase (1), decrease (D), or have no effect (N) on the ratios shown. Assume each ratio is less
than 1.0 before the action is taken.
1. Issuance of long-term bonds
2. Issuance of short-term notes
3. Payment of accounts payable.
4. Purchase of inventory on account
Action
5. Purchase of inventory for cash
6. Purchase of equipment with a 4-year note
7. Repayment of long-term notes payable
8. Issuance of common stock
9. Payment for advertising expense
10. Purchase of short-term investment for cash
11. Reclassification of long-term notes payable to current notes payable
Current
Ratio
Acid-Test
Ratio
Debt to
Equity Ratio

Transcribed Image Text:The current asset section of Guardian Consultant's balance sheet consists of cash, accounts receivable, and prepaid expenses. The
2021 balance sheet reported the following: cash, $1,500,000; prepaid expenses, $560,000; long-term assets, $2,900,000; and
shareholders' equity, $3,000,000. The current ratio at the end of the year was 2.5 and the debt to equity ratio was 1.6.
Required:
Determine the following 2021 amounts and ratios: (Round your "The acid-test ratio" answer to 1 decimal place.)
1. Current liabilities
2. Long-term liabilities
3. Accounts receivable
4. The acid-test ratio
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