Individual transactions often have a significant impact on ratios. This problem will consider the direction of such an impact.
|
Ratio Transaction |
Times Interest |
Debt Ratio |
Debt/ Equity |
Debt to Tangible |
|
a. Purchase of buildings |
______ |
______ |
______ |
______ |
|
b. Purchase of inventory on |
______ |
______ |
______ |
______ |
|
c. Declaration and payment of |
______ |
______ |
______ |
______ |
|
d. Declaration and payment of |
______ |
______ |
______ |
______ |
|
e. Firm increases profits by |
______ |
______ |
______ |
______ |
|
f. Appropriation of |
______ |
______ |
______ |
______ |
|
g. Sale of common stock. |
______ |
______ |
______ |
______ |
|
h. Repayment of long-term |
______ |
______ |
______ |
______ |
|
i. Conversion of bonds to |
______ |
______ |
______ |
______ |
|
j. Sale of inventory at greater |
______ |
______ |
______ |
______ |
Required Indicate the effect of each of the transactions on the ratios listed. Use + to indicate an increase, -to indicate a decrease, and 0 to indicate no effect.
Assume an initial times interest earned of more than 1, and a debt ratio, debt/equity ratio, and a total debt to tangible net worth of less than 1.