Question 1. 1. Decisions made by management affect the ratios used to measure liquidity and solvency. Below are some transactions. Show how each would affect the stated ratio. Assume that each ratio is greater than 1 before the action is undertaken. Hints on how to show how a transaction would affect the ratio is to use my handy hints from Chapter 3 AND to use "fake numbers to run the effect through the ratio. Should you need it, there is a table of ratios in Chapter 5 Appendix A starting on page 5-31 in the electronic textbook on WileyPlus. Action Current Ratio Acid-Test Ratio Debt-to- Equity Ratio 1. Payment of accounts payable 2. Purchase of inventory on account 3. Purchase of inventory with cash 4. Payment of bonds at maturity with sinking fund 5. Issuance of common stock for cash 6. Pay utilities expense 7. Purchase trading security with cash Payment of accounts payable if the ratios are less than 1 8