Most decisions made by management impact the ratios analysts use to evaluate per

Question

Most decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the actions listed below will immediately increase (I), decrease (D), or have no effect (N) on the ratios shown. Assume each ratio is less than 1.0 before the action is taken.

Current Acid-test Debt to
Action ratio ratio equity ratio

1. Issuance of long-term bonds ____ ____ ____

2. Issuance of short-term bonds ____ ____ ____

3. Payment of accounts payable ____ ____ ____

4. Purchase of inventory on account ____ ____ ____

5. Purchase of inventory for cash ____ ____ ____

6. Purchase of equipment with a 4-year note ____ ____ ____

7. Retirement of bonds ____ ____ ____

8. Sale of common stock ____ ____ ____

9. Write-off of obsolete inventory ____ ____ ____

10. Purchase of short-term investment for cash ____ ____ ____

11. Decision to refinance on a long-term basis

Some currently maturing debt ____ ____ ____

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