PROBLEM 17-15 Effects of Transactions on Various Financial Ratios [LO2, LO3

Transcribed Image Text: ease
PROBLEM 17-15 Effects of Transactions on Various Financial Ratios [LO2, LO3. L0
your choice. In all cases, assume that the current assets exceed current liabilities both before and
the effect in terms of increase, decrease, or no effect on the ratio involved, and give the reason for
Indicate the effect that each transaction or event would have on the ratio listed opposite to it. State
In the right-hand column below, certain financial ratios are listed. To the left of each ratio is a business
transaction or event relating to the operating activities of Graham Company.
Business Transaction or Event
Ratio
Debt-to-equity ratio
Earnings per share
Acid-test ratio
1. Inventory was sold for cash at a profit.
2. Land was purchased for cash.
3. Inventory was sold on account at cost.
4. Some accounts payable were paid off.
5. A customer paid an overdue bill.
6. A cash dividend was declared, but not yet paid.
7. A previously declared cash dividend was paid.
8. The company’s common stock price increased.
9. The company’s common stock price increased and earnings
per share remained unchanged.
10. Property was sold for a profit.
11. Obsolete inventory was written off as a loss.
12. Bonds were sold with an interest rate less than the company’s
Working capital
Average collection period
Current ratio
Current ratio
Book value per share
Dividend yield ratio
Return on total assets
Inventory turnover ratio
Return on common
stockholders’ equity
Dividend payout ratio
return on assets.
13. The company’s common stock price decreased and the
dividend paid per share remained the same.
14. The company’s net income decreased, but long-term debt
remained unchanged.
15. An uncollectible account was written off against the Allowance
for Bad Debts.
16. Inventory was purchased on credit.
17. The company’s common stock price increased and earnings ·
per share remained unchanged.
18. The company paid off some accounts payable.
Times interest earned
Current ratio
Acid-test ratio
Price-earnings ratio
Debt-to-equity ratio
Required:
after the event or transaction. Use the following format for your answers:
Effect on Ratio
Reason for Increase, Decrease, or No Effecr
1.
2.
Etc.

-25-


Buy plagiarism free, original and professional custom paper online now at a cheaper price. Submit your order proudly with us



Essay Hope