4. Indicate the effect of each of the following transactions on the ratios listed. Use +...

 

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4. Indicate the effect of each of the following transactions on the ratios listed. Use + to indicate an increase, D to indicate a decrease, and 0 to indicate no effect. Assume an initial times interest earned ratio of 3 to 1, debt ratio of 0.5 to 1, debt/equity ratio of 1.0 to 1, and total debt to tangible net worth ratio of 1.1 to 1. Times Debt Total Debt Interest Debt Equity Tangible Net Worth Ratio Transaction Earned Ratio Ratio Ratio a Collection of accounts receivable. b. Firm has decreasing profits due to rising cost of sales. c. Firm appropriates a substantial amount for expansion. d. Conversion of preferred stock to common. e. Repayment of a short-term bank loan (gnore interest). E Payment for a valuable trademark. g. The stock is split two for one. h. Purchase of equipment financed by a long-term note (consider interest). i Conversion of bonds to stock. j. Declaration and payment of dividend. k The firm experiences a rise in the rate charged on its line of credit. 4. Indicate the effect of each of the following transactions on the ratios listed. Use + to indicate an increase, D to indicate a decrease, and 0 to indicate no effect. Assume an initial times interest earned ratio of 3 to 1, debt ratio of 0.5 to 1, debt/equity ratio of 1.0 to 1, and total debt to tangible net worth ratio of 1.1 to 1. Times Debt Total Debt Interest Debt Equity Tangible Net Worth Ratio Transaction Earned Ratio Ratio Ratio a Collection of accounts receivable. b. Firm has decreasing profits due to rising cost of sales. c. Firm appropriates a substantial amount for expansion. d. Conversion of preferred stock to common. e. Repayment of a short-term bank loan (gnore interest). E Payment for a valuable trademark. g. The stock is split two for one. h. Purchase of equipment financed by a long-term note (consider interest). i Conversion of bonds to stock. j. Declaration and payment of dividend. k The firm experiences a rise in the rate charged on its line of credit.

Answer rating: 100% (QA)

a Collection of accounts receivable 0 0 0 0 b Firm has dec... View the full answer