Most decisions made by management impact the ratios analysts use to evaluate per

Question

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 (I), decrease (D), or have no effect (N) on the ratios shown. Assume each ratio is less than 1.0 before the action is taken.

Current Acid-test Debt to
Action ratio ratio equity ratio

1. Issuance of common stock for cash ____ ____ ____

2. Purchase of inventory on account ____ ____ _____

3. Receipt of cash from a customer on account ____ ____ ____

4. Expiration of prepaid rent ____ ____ ____

5. Payment of a cash dividend ____ ____ ____

6. Purchase of equipment with a 6-month note ____ ____ ____

7. Purchase of long-term investment for cash ____ ____ ____

8. Sale of equipment for cash (no gain or loss) ____ ____ ____

9. Write-off of obsolete inventory ____ ____ ____

10. Decision to refinance on a long-term basis

currently-maturing debt ____ ____ ____

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