A firm had the following values for the four debt ratios discussed in the chapter: Liabilities to Assets Ratio: less than 1.0 Liabilities to Shareholders' Equity Ratio: greater than 1.0 Long-Term Debt to Long-Term Capital Ratio: less than 1.0 Long-Term Debt to Shareholders' Equity Ratio: equal to 1.0

1. Suppose the firm issued short-term debt for cash. Liabilities to Assets

• A. increased
• B. stayed the same
• C. decreased

2.Suppose the firm issued short-term debt for cash. Long-Term Debt to Long-Term Capital

• A. increased
• B. stayed the same
• C. decreased

3.Suppose the firm issued long-term debt and used the cash proceeds to redeem short-term debt. Treat as a unified transaction. Liabilities to Shareholders' Equity

• A. increased
• B. stayed the same
• C. decreased

4. Suppose the firm issued long-term debt and used the cash proceeds to redeem short-term debt. Treat as a unified transaction. Long-Term Debt to Shareholders' Equity

• A. increased
• B. stayed the same
• C. decreased

5. Suppose the firm redeemed (paid off) long-term debt with cash. Liabilities to Assets

• A. increased
• B. stayed the same
• C. decreased

6.Suppose the firm redeemed (paid off) long-term debt with cash. Long-Term Debt to Long-Term Capital

• A. increased
• B. stayed the same
• C. decreased

7. Suppose the firm issued short-term debt and used the cash proceeds to repurchase shares of its common stock (treat as a unified transaction). Liabilities to Shareholders' Equity

• A. increased
• B. stayed the same
• C. decreased

8. Suppose the firm issued short-term debt and used the cash proceeds to repurchase shares of its common stock (treat as a unified transaction). Long-Term Debt to Shareholders' Equity

• A. increased
• B. stayed the same
• C. decreased

9.Suppose the firm issued $50 million of long-term debt and $50 million of common stock and used the proceeds to buy the building and equipment needed to produce a promising new product. Liabilities to Assets

• A. increased
• B. stayed the same
• C. decreased

10.Suppose the firm issued $50 million of long-term debt and $50 million of common stock and used the proceeds to buy the building and equipment needed to produce a promising new product. Long-Term Debt to Shareholders' Equity

• A. increased
• B. stayed the same
• C. decreased