Effects of events on financial ratios
The following balances were taken from the December 31, 2008, balance sheet of Manpower, Inc., a world-leading workforce provider (dollars in millions):
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Current assets |
$4,690 |
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Long-term assets |
1,928 |
|
Current liabilities |
2,907 |
|
Long-term liabilities |
1,228 |
|
Shareholders” equity |
2,483 |
Early in 2009, Manpower considered the financial effects of several events.
REQUIRED:
For each of the five events listed here, indicate how each event 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 Sales |
Current Assets Current Liabilities |
Total Liabilities Shareholders” Equity |
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1. Purchase equipment on for cash. |
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2. Purchase machinery in exchange for a long-term note payable |
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3. Pay salaries, which have not been accrued,to employees. |
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4. Declare a divident. |
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5. Issue common stock to satisfy a current obligation. |