In the right-hand column below, certain financial ratios are listed. To the left of each ratio is

Question:

In the right-hand column below, certain financial ratios are listed. To the left of each ratio is a business transaction or event relating to the operating activities of Graham Company.
1. Inventory was sold for cash at a profit. Debt-to-equity ratio
2. Land was purchased for cash. Earnings per share
3. Inventory was sold on account at cost. Acid-test ratio
4. Some accounts payable were paid off. Working capital
5. A customer paid an overdue bill. Average collection period
6. A cash dividend was declared, but not yet paid. Current ratio
7. A previously declared cash dividend was paid. Current ratio
8. The company€™s common stock price increased. Book value per share
9. The company€™s common stock price increased. Dividend yield ratio
Earnings per share remained unchanged.
10. Property was sold for a profit. Return on total assets
11. Obsolete inventory was written off as a loss. Inventory turnover ratio
12. Bonds were sold with an interest rate Return on common stockholders€™ equity less than the company€™s return on assets.
13. The company€™s common stock price decreased. Dividend payout ratio
The dividend paid per share remained the same.
14. The company€™s net income decreased, but Times interest earned long-term debt remained unchanged.
15. An uncollectible account was written off Current ratio against the Allowance for Bad Debts.
16. Inventory was purchased on credit. Acid-test ratio
17. The company€™s common stock price increased. Price-earnings ratio
Earnings per share remained unchanged.
18. The company paid off some accounts payable. Debt-to-equity ratio
Required:
Indicate the effect that each transaction or event would have on the ratio listed opposite to it. State the effect in terms of increase, decrease, or no effect on the ratio involved, and give the reason for your choice. In all cases, assume that the current assets exceed current liabilities both before and after the event or transaction. Use the following format for youranswers:
In the right-hand column below, certain financial ratios are lis
Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally.    Inventory Turnover Ratio FormulaWhere,...
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...
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Managerial Accounting

ISBN: 9780073526706

12th Edition

Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer

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