Effect of Transactions on Various Financial Ratios
Not what you're looking for?
Effect of transactions on various financial ratios
Indicate the effect that each transaction/event listed here will have on the financial ratio listed opposite it, and provide an explanation for your answer. Use + for increase, - for decrease, and (NE) for no effect. Assume that current assets exceed current liabilities in all cases, both before and after the transaction/event.
See attached for remainder of questions.
Purchase this Solution
Solution Summary
Response provides guidance on effect of transactions on various financial ratios.
Solution Preview
11.3
Effect of transactions on various financial ratios
Indicate the effect that each transaction/event listed here will have on the financial ratio listed opposite it, and provide an explanation for your answer. Use + for increase, - for decrease, and (NE) for no effect. Assume that current assets exceed current liabilities in all cases, both before and after the transaction/event.
Transaction/Event Financial Ratio
A) Split the common stock 2 for 1 Book value per share of common stock (No effect-NE)
There will be no impact on book value per share as the stock split only affects the number of shares and it doesn't affect the value of the share.
B) Collected accounts receivable Number of days' sales in accounts receivable (- decrease)
Number of Days' sales= Accounts receivable/Daily Sales.
There will be decline due to decline in value of receivables.
C) Issued common stock for cash Total asset turnover (- decrease)
Total Asset turnover= Sales/Assets
This will decrease in Asset turnover due to increase in Assets (Cash).
D) Sold treasury stock Return on equity (+ ...
Purchase this Solution
Free BrainMass Quizzes
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking