(Transaction effects on ratios) Two lists follow one for ratios (including the ratio prior to the transactions) and another for transactions Ratios 1 Current ratio, 1 9 1 2 Quick ratio, 0 8 1 3 Accounts receivable turnover, 10 6 times 4 Inventory turnover, 7 8 times 5 Return on assets, 12 6 Profit margin, 10 4 Transactions a Goods costing $360,000 are sold to customers for $480,000 in cash b Accounts receivable of $130,000 are collected c Inventory costing $80,000 is purchased from suppliers on credit d A short term bank loan for $50,000 is repaid to the bank e The company incurs a long term bank loan of $150,000 to purchase equipment f The company incurs an account payable of $40,000 for operating expenses g The company pays a cash dividend of $200,000 State the immediate effect (increase, decrease, or no effect) of each transaction on each ratio 1 2 3 4 5 6 Ratio Transaction Current ratio of 1 9 to 1 Quick ratio of 0 8 to 1 A R turnover of 10 6 times Inventory turnover of 7 8 times ROA of 12 Profit Margin of 10 4 a DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect b DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect c DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect d DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect e DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect f DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect g DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect DecreaseIncreaseNo Effect

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Posted on Sep 18, 2024

(Transaction effects on ratios) Two lists follow: one for ratios (including the ratio prior to the transactions) and another for transactions.

Ratios:
1.		Current ratio, 1.9:1
2.		Quick ratio, 0.8:1
3.		Accounts receivable turnover, 10.6 times
4.		Inventory turnover, 7.8 times
5.		Return on assets, 12%
6.		Profit margin, 10.4%

Transactions:
a.		Goods costing $360,000 are sold to customers for $480,000 in cash.
b.		Accounts receivable of $130,000 are collected.
c.		Inventory costing $80,000 is purchased from suppliers on credit.
d.		A short-term bank loan for $50,000 is repaid to the bank.
e.		The company incurs a long-term bank loan of $150,000 to purchase equipment.
f.		The company incurs an account payable of $40,000 for operating expenses.
g.		The company pays a cash dividend of $200,000.