Casey Communications Recently Issued New Common Stock and Used the Proceeds

question 59

Multiple Choice

Casey Communications recently issued new common stock and used the proceeds to pay off some of its short-term notes payable. This action had no effect on the company's total assets or operating income. Which of the following effects would occur as a result of this action?

• A) The company's current ratio increased.
• B) The company's times interest earned ratio decreased.
• C) The company's basic earning power ratio increased.
• D) The company's equity multiplier increased.
• E) The company's debt ratio increased.

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Definitions:

Prepaid Items

Expenses paid in advance for goods or services to be received or used in the future, such as insurance or rent.

Accrued Expenses

Costs that have been incurred but not yet paid or documented in the accounting records during a specific accounting period.

Liability Accounts

Financial accounting records that represent the obligations or debts a company owes to others.

Expense Accounts

Accounts used to track and categorize money spent by a company in conducting its operations.