The “Big 3” auto makers (General Motors, Ford, and Chrysler) did not have good years in 1990 and 1991. To bolster cash reserves and raise credit ratings, each of the three had major stock issuances during the period. General Motors raised about $600 million, Ford raised over $750 million, and Chrysler sold more than $350 million in newly issued common stock. While each company used the proceeds a little differently, they all used some of it to reduce debt, update plant and equipment, and increase current assets. REQUIRED:

a. Describe how the issuance of stock to reduce debt, update plant and equipment, and increase current assets affects the fundamental accounting equation.

b. Explain how the issuance of stock could increase a company’s credit rating