Following are the accounting ratios. For each one you have to tell the effect (increase, decrease or no change) of the transactions that are given below. No calculations or data is required to solve this question. You just have to tell the affect of the transactions given on these ratios by assuming numbers.

For example:

1st transaction i.e. purchase of inventory on cash tells us that cash will decrease and inventory will increase. Lets assume that inventory was purchased for rs 500 which means cash was decreased by 500. Assuming like this we have to tell the effect of these transactions (whether the debt to total assets ratio will increase, decrease or remain the same due to the increase in Inventory and a decrease in cash)

Note: Please note that you have to tell the effect of every transaction on all of the ratios mentioned below

Ratios:

1. Debt to Total Assets

2. Working Capital

3. Current Ratio

4. Book Value per Shares

5. Gross Profit Margin

6. Net Profit Margin

7. Earnings per Share

8. Return on Assets

9. Return on Equity

10. Inventory Turnover

11. Inventory Holding Days

12. Receivables Turnover

13. Receivables Days

14. Assets Turnover

Transactions:

1. Collection of accounts receivable

2. Raising a long term loan

3. Paying back a long term loan

4. Raising a short term loan

5. Paying back a short term loan

6. Issuing new shares at par

7. Issuing new shares at premium

8. Recording net income in retained earnings

9. Approving and paying cash dividends on ordinary shares

10. Approving and issuing bonus shares (stock dividends)

11. Purchasing a new building on cash

12. Purchasing a new building by issuing new shares recorded at premium

13. Purchasing Treasury shares

14. Upward Revaluation of PPE

15. Recording impairment losses on inventory

Answer rating: 100% (QA)

Transactions 1 Debt to Total Assets 2 Working Capital 3 Current Ratio 4 Book Value per Shares 5 Gross Profit Margin 6 Net Profit Margin 7 Earnings per Share 8 Return on Assets 9 Return on Equity 10 In... View the full answer