Each Transaction Numbered 1 Through 5 Below Involves an Equity $\quad$

question 66

Essay

Each transaction numbered 1 through 5 below involves an equity security originally acquired at a cost of $1,000. Identify the effect each transaction has on the current ratio and earnings per share by selecting from the effects listed in a through f.You may use each letter more than once or not at all. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Effects }$
a. Increase in current ratio and earnings per share.
b. Does NOT change earnings per share or the current ratio.
c. Does NOT change earnings per share; may impact the current ratio under certain conditions.
d. Decrease in current ratio and earnings per share.
e. Increases earnings per share.
f. Can't determine the direction of changes in at least one ratio from the event qiven.
____ 1.Passive investment with a current balance sheet value of $1,200 is sold for $1,100.
____ 2.Passive investment with a current balance sheet value of $800 is sold for $800.
____ 3.Passive investment with a current balance sheet value of $1,200 is sold for $1,300.
____ 4.Passive investment has a market value of $800 at yearend.
____ 5.Passive investment has a market value of $1,200 at yearend.

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Definitions:

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded for a given period, typically sloping downward.

Quantity Demanded

The total amount of a good or service consumers are willing and able to purchase at a specific price level, during a specified period.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price level.

Price of Oil

The cost per barrel of crude oil as determined by global markets and supply-demand dynamics.