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Analyzing Cash Flow Ratios Meagan Enterprises reported the following information for the past year of operations: For each transaction, indicate whether the ratio will (I)
Analyzing Cash Flow Ratios
Meagan Enterprises reported the following information for the past year of operations: For each transaction, indicate whether the ratio will (I) increase, (D) decrease, or (N) have no effect.
Transaction | Free Cash Flow $400,000 | Operating-Cash-Flow-to- Current Liabilities Ratio 1.1 times | Operating-Cash-Flow-to- Capital Expenditures Ratio 5.0 times |
---|---|---|---|
a. Recorded credit sales of $17,000 | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect |
b. Collected $6,000 owed from customers | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect |
c. Purchased $50,000 of equipment on long-term credit | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect |
d. Purchased $70,000 of equipment for cash | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect |
e. Paid $17,000 of wages with cash | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect |
f. Recorded utility bill of $14,750 that has not been paid | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect | AnswerIncreaseDecreaseNo Effect |
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