For ratios behavior does the finncial ratios increase, decrease or stay the same Also which finacial accounts are effected by the specified transactions

You've been asked to tutor Savannah, a finance student who doesn't feel comfortable about her understanding of the relationship between a company's business activities, its financial accounts, and the company's financial ratios. To better appreciate these relationships, you've created the following exercises for Savannah to complete. The purpose of these exercises is to help Savannah (1) understand the effect of business transactions on financial statement-such as balance sheet and income statement-accounts and (2) how these changes in the numerators and denominators of financial ratios affect the ratios' values. However, before using these exercises in your tutoring session later today, you'll want to run the calculations on the following two business transactions, to verify the accuracy of your answers To provide a consistent frame of reference for the company's financial statements and ratios, assume that the following balance sheet and income statement reflect the company's pretransaction condition and performance National Transmissions Inc.'s Pretransaction National Transmissions Inc.'s Statement of Financial Condition Pretransaction Statement of Financial Performance Sales Less: Cost of goods sold1 Gross profit Less: Operating expenses Operating profit (EBIT) Less: Interest expense2 Earnings before taxes (EBT) Less: Tax expense3 Net income Cash Marketable securities Accounts receivable Inventory Prepaid expenses $20,000 20,000 10,000 50,000 100,000 500,000 600,000 150,000 350,000 900,000 1,400,000 $2,000,000 $15,000 Accounts payable $5,000,000 2,000,000 3,000,000 600,000 2,400,000 33,000 2,367,000 828,450 $1,538,550 10,000 Wages payable 470,000 Taxes payable 500,000 Notes payable 5,000 Total current liabilities Total current assets 1,000,000 Long-term debt Total liabilities Gross plant and equipment Accumulated depreciation Net plant and equipment 1,500,000 Common stock 500,000 1,0 Capital paid in excess of par 00,000 Retained earnings Total equity Total assets $2,000,000 Total debt and equity Cost of goods sold equals 40% of sales interest expense equals 6% of the combined notes payable and long-term debt balances The average federal and state tax rate is 35% Indicate if any of the listed financial statement accounts is affected by the following business transactions and whether the listed ratios will increase, decrease, or remain unchanged as a result of the transaction. (Hint: Assume that the business transaction occurs exactly as stated without interpreting it further. Do not consider any related transactions that may occur before or after the specified transaction.) Business Transaction 1 National Transmissions Inc. (NTI) purchases a new piece of equipment for $50,000, using a cash down payment of $5,000 and a note payable for the outstanding balance