P5-1 3 (Effects of events on financial ratios) The following balances were taken from the December 31, 1996 balance sheet of Wellington Boating. Current assets $23,000 Long-term assets 57,000 Current liabilities 15,000 Long-term liabilities 40,000 Stockholders’ equity 25,000 Early in 1997 Wellington is considering the financial effects of the five events listed below. Indicate how each event would affect the financial ratios listed below by completing the fol¬ lowing chart. Assume that financial statements are prepared immediately after each event. Treat each event independently, and use the following key: Increase (+), Decrease (-), and No Effect (NE). Return on Current Debt/ Equity Ratio Equity 1. Purchase inventory on account. 2. Sell land for cash at a gain. 3. Provide services to customers, receiving cash in return. 4. Make a principal payment on an outstanding long-term liability. 5. Issue common stock for cash.