suppose a supervisor asks you to reclassify a short-term note payable as a long-term liability. what effect will this have on the current ratio

a. When might these two ratios be similar in amount? b. When will they be different in atmount? C. If the current ratio is at an acecptable level bet the quick ratio is weak, what factors might catise this? d. Why might some firm prefer to lave low current and quick ratios? 2 How much flexibelity should the analy st or manayct accept in constructing ratio definitions for use within the same company or ofgatization? For example, why twighht the analyst be thore flesible in defining iloe ducki ratio bet not the current ratio? On the other hand, would the satme flexibility be associated with a vertical analysis? Why riot? 23 Discuss the procesc of calculating halamee shect vertical (componition) ratios: How are such ratios tised? Why are these ratios important? eclassifying Liabilities 21 Suppose that a superviwar acks you to reclasify a short-fertu note payable as a lons-term liability. a. What effect will this have on the currenf ratio? b. Could such an cffect be viewed betieficially by a curfent or prospective lender? C. How would yotir answer change if the lender agrecd to extend the due date on the loan by 18 nonths? d. Ilow wotid your attower in patt b change if a prospective lender also lockd other long ferm tiahilitics? Why? c. Convider the cthical implications of rectassifying the note, assuming that you know the note's maturity is at the end of the curtent fiscal yeat. You may as sume that the stie of the note is significunt (or material). As an sccountant within the firm, what should/would yot do? As the firm's atulitor, how woukd you view this rectassification? EXERCISES Classifying Accoumts 425 Clissify each aceount listed beckow into ohe of the following cafegorics: 1. curfent ussets, 2. noncurtent asseis 3. curtent liabilities. 4. noticutrent liabilities, and 5. owhers ciuity. a. cavh