To indicate: The effect of the given transactions on total assets, current ratio and net income. Introduction: Financial Ratio Analysis: Financial ratio analysis is one of the tools of financial analysis of a firm. It represents the relationship between two or more items of the financial statement.

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Directions: Indicate the effects of the transactions listed in the following table on total current assets, current ratio, and net income. Use (+) to indicate an increase, (−) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. (Note: A good accounting background is necessary to answer some of these questions; if yours is not strong, answer just the questions you can.) Total Current Assets Current Ratio Effect on Net Income 4. A fixed asset is sold for less than book value. + + - 5. A fixed asset is sold for more than book value. + + + 6. Merchandise is sold on credit + + + 7. Payment is made to trade creditors for previous purchases. - + 0 8. A cash…

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Chapter 4, Problem 12Q

Summary Introduction

To indicate: The effect of the given transactions on total assets, current ratio and net income.

Introduction:

Financial Ratio Analysis: Financial ratio analysis is one of the tools of financial analysis of a firm. It represents the relationship between two or more items of the financial statement.

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Directions: Indicate the effects of the transactions listed in the following table on total current assets, current ratio, and net income. Use (+) to indicate an increase, (−) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. (Note: A good accounting background is necessary to answer some of these questions; if yours is not strong, answer just the questions you can.) Total Current Assets Current Ratio Effect on Net Income 4. A fixed asset is sold for less than book value. + + - 5. A fixed asset is sold for more than book value. + + + 6. Merchandise is sold on credit + + + 7. Payment is made to trade creditors for previous purchases. - + 0 8. A cash…

Directions: Indicate the effects of the transactions listed in the following table on total current assets, current ratio, and net income. Use (+) to indicate an increase, (−) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. (Note: A good accounting background is necessary to answer some of these questions; if yours is not strong, answer just the questions you can.) Total current assets Current ratio Effect on net income 1. Cash is acquired through issuance of additional common stock. 2. Merchandise is sold for cash. 3. Federal income tax due for the previous year is paid. 4. A fixed asset is sold for less than book value. 5. A fixed asset is sold for more than book value. 6. Merchandise is sold on credit.…

Indicate the effects of the transactions listed in the following table on total current assets,current ratio, and net income. Use (1) to indicate an increase, (2) to indicate a decrease,and (0) to indicate either no effect or an indeterminate effect. Be prepared to state anynecessary assumptions and assume an initial current ratio of more than 1.0. (Note: A goodaccounting background is necessary to answer some of these questions; if yours is notstrong, answer the questions you can.)