Purchase treasury stock for cash is total liabilities remains unchanged and tota

Question

Purchase treasury stock for cash is total liabilities remains unchanged and total asset decrease, debt ratio should be increase .why ans is no affect >Decision Cases Decision Case 17-1 ABC Company had a bad year in 2014; the company suffered n the losses, some of the measures of return deteriorated. Assu any suffered net losses. Due to n deteriorated. Assume top management BC is pondering ways to improve its ratios for the following year. In management is considering the following transactions: 1. Borrow $100 million on long-term debt. 2. Purchase treasury stock for $500 million cash. 3. Expense one-fourth of the goodwill carried on the books. 4. Create a new design division at a cash cost of $300 million. 5. Purchase patents from Johnson Co. paying $20 million cash. particular, Top management wants to know the effects of these transactions (increase, decrease. or no effect) on the following ratios: a. Current ratio b. Debt ratio c. Rate of return on common stockholders' equity

Explanation / Answer

A.Current ration Debt ration Rate of return on common stockholder's equity.
1.Borrow $ 100 million on long term debt,increase increase no effect.
2.Purchase trasury stock for $500 million cash.Decrease increase increase.
3.Expense one fourth of the goodwill carried on the books.

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