The following ratios are available for Yami Corporation:
Current ratio................................1.5:1
Inventory turnover....................10 times
Debt to total assets........................40%
Profit margin..............................10%
Asset turnover.........................2 times
Instructions
(a) Indicate whether each of the above ratios would increase, decrease, or remain unchanged as a result of each of the following independent transactions:
1. Yami pays an account payable.
2. Yami collects an account receivable.
3. Yami purchases a long-term non-strategic equity investment.
4. Yami sells merchandise for cash at a profit.
5. Yami buys equipment for cash.
(b) Would your answers to any of the above change if the current ratio were 0.5:1 instead of 1.5:1?