Effects of events on financial ratios
The following balances were taken from the October 31, 2008, balance sheet of Hewlett-Packard (dollars in millions).
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Current assets |
$51,728 |
|
Long-term assets |
61,603 |
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Current liabilities |
52,939 |
|
Long-term liabilities |
21,450 |
|
Shareholders” equity |
38,942 |
Early in fiscal 2009, Hewlett-Packard considered the financial effects of several events.
REQUIRED:
For each of the five events listed here, indicate how they would affect the financial ratios listed by completing the following chart. Assume that financial statements are prepared immediately after each event. Treat each event independently, and use the following key: Increase (+), Decrease (–), and No Effect (NE).
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Net Income Shareholders” |
Current Assets Current Liabilities |
Total Liabilities Shareholders” Equity |
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1. Purchase inventory on account. |
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2. Sell assets for cash at a gain. |
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3. 2. Provide services to customers, receiving |
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4. Make a principal payment on an Outstanding Long term liability. |
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5. Issue common stock for cash. |