Two lists follow: one for ratios (including the ratio prior to the transactions) and another for transactions.

Question:

Ratios:

1. Current ratio, 1.9:1

2. Quick ratio, 0.8:1

3. Accounts receivable turnover, 10.6 times

4. Inventory turnover, 7.8 times

5. Return on assets, 12%

6. Profit margin, 10.4%

Transactions:

a. Goods costing $360,000 are sold to customers for $480,000 in cash.

b. Accounts receivable of $130,000 are collected.

c. Inventory costing $80,000 is purchased from suppliers on credit.

d. A short-term bank loan for $50,000 is repaid to the bank.

e. The company incurs a long-term bank loan of $150,000 to purchase equipment.

f. The company incurs an account payable of $40,000 for operating expenses.

g. The company pays a cash dividend of $200,000.

Required

State the immediate effect (increase, decrease, or no effect) of each transaction on each ratio. You may want to format your answer in a table with the ratios across the top and the transactions down the left side.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... 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...

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