Individual transactions often have a significant impact on ratios. This problem will consider the direction of such an impact.

Times Debt/ Debt Ratio Interest Debt Equity to Tangible Transaction Earned Ratio Ratio Net Worth

a. Purchase of buildings financed by mortgage. ______ ______ ______ ______

b. Purchase of inventory on short-term loan at 1% over prime rate. ______ ______ ______ ______

c. Declaration and payment of cash dividend. ______ ______ ______ ______

d. Declaration and payment of stock dividend. ______ ______ ______ ______

e. Firm increases profits by cutting cost of sales. ______ ______ ______ ______

f. Appropriation of retained earnings. ______ ______ ______ ______ g. Sale of common stock. ______ ______ ______ ______ h. Repayment of long-term bank loan. ______ ______ ______ ______ i. Conversion of bonds to common stock outstanding. ______ ______ ______ ______ j. Sale of inventory at greater than cost. ______ ______ ______ ______ Required Indicate the effect of each of the transactions on the ratios listed. Use + to indicate an increase, − to indicate a decrease, and 0 to indicate no effect.

Assume an initial times interest earned of more than 1, and a debt ratio, debt/equity ratio, and a total debt to tangible net worth of less than 1.