Sandra Company and Nova Inc. each signed lease agreements on January 1, 2008. Nova's lease qualified for capital lease treatment, but Sandra's lease did not. All other information for both companies is identical. Payments on each lease were due at the end of each year. The following information is from each company's December 31, 2007 financial statements:

Required:
1. Based on this information, what will be the impact of the lease transaction on Novas current ratio and debt-to-equity ratio on January 1, 2008 immediately after signing the lease?
2. What will be the impact on the return on assets ratio for 2008?
3. How would Sandra's ratio effects differ from Nova’s? (Hint: Compute Nova’ ratios before and after the capital lease transaction and assume that the lease liability and asset were recorded at $1,000.)

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Sandra Nova Current assets $2,000 $2,000 Total assets 5,000 5,000 Current liabilities 2.000 2,000 Total liabilities 2,500 2,500 Net income 500 500