You are provided with the following transactions that took place during the year


For each transaction listed above, indicate whether it will increase (I), decrease (D), or have no effect (NE) on the ratios:

Free Cash Flow ($125,000) Current Cash Debt Coverage Ratio (0.5 times) Cash Debt Coverage Ratio (0.3 times)


a. Recorded credit sales $2,500.

b. Collected $1,900 owed by customers.

c. Paid amount owed to suppliers $2,750.

d. Recorded sales returns of $500 and credited the customer’s account.

e. Purchased new equipment $5,000; signed a long-term note payable for the cost of the equipment.

f. Purchased a patent and paid $65,000 cash for the asset.