(Effect of transactions and economic events on ratios, LO 2, 4, 5, 7, 8, 9) The president of Oskelaneo Ltd. (Oskelaneo) wants to know the effect that a number of transactions and economic events will have on several financial measures for the company’s fiscal year ended September 30, 2007. Complete the following table by indicating whether the listed transactions or economic events would increase, decrease, or have no effect on the financial measures listed. Explain your reasoning and state any assumptions that you make. Consider each item independently.

Transcribed Image Text:

Ratio/amount before taking the transaction/economic event into effect. a. Oskelaneo paid interest on a bank loan. b. Oskelaneo arranged a new capital lease. c. Oskelaneo had a decrease in its future income taxes. d. Oskelaneo repaid a bond that was classified as the current portion of long-term debt. e. Oskelaneo received cash from a customer for services that will be provided in February 2008. f. Oskelaneo retired a bond early and recognized a gain of $55,000 (the bond retired was not classified as a current liability). g. A customer sued Oskelaneo in January 2007 for negligence. A decision by the court is not expected for at least two years. The company's lawyers state that it is unlikely the company will lose the lawsuit. Debt-to- equity ratio Current Interest ratio coverage ratio 1.2:1 1.87 4.38 Cash from operations Return on assets $750,000 5.3%