The Southwick Company has the following balance sheet ($000):

Assets Liabilities and Stockholders Equity

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Cash $ 500 Accounts payable $1,750

Marketable securities 750 Notes payable 1,250 Accounts receivable 2,000 Total current liabilities $3,000 Inventory 2,500 Long-term debt 1,750

Total current assets $ 5,750 Total liabilities $4,750 Plant and equipment (net) 5,000 Common stock ($1 par) 1,000 Total assets $10,750 Contributed capital in excess of par 2,000 Retained earnings 3,000 Total stockholders equity $6,000 Total liabilities and stockholders equity $10,750

Financial Ratios

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Current ratio 1.92

Quick ratio 1.08

Debt-to-equity ratio 0.79

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Evaluate the impact of each of the following (independent) financial decisions on Southwicks current, quick, and debt to equity ratios:

a. The firm reduces its inventories by $500,000 through more efficient inventory management procedures and invests the proceeds in marketable securities.

b. The firm decides to purchase 20 new delivery trucks for a total of $500,000 and pays for them by selling marketable securities.

c. The firm borrows $500,000 from its bank through a short-term loan (seasonal financing) and invests the proceeds in inventory.

d. Southwick borrows $2 million from its bank through a 5-year loan (interest due annually, principal due at maturity) and uses the proceeds to expand its plant.

e. The firm sells $2 million (net) in common stock and uses the proceeds to expand its plant.