Assume That the Current Ratio Is 2:1 for the Company

question 68

Essay

Assume that the current ratio is 2:1 for the company in question. Show the effect of each of the transactions below on total assets and the current ratio by using one of the following symbols in each box to complete the table. If the numerator and denominator of a ratio both increase or both decrease by the same amount, the effect of the event on the ratio is "insufficient data."

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Definitions:

Repurchase

The action of buying back previously sold shares or goods, often by the company that issued or sold them initially.

Cash Dividends

Distributions of a corporation's earnings to shareholders in the form of cash.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, usually with dividends that are paid out before those to shareholders of common stock.

Common Stock

Common stock is a type of equity ownership in a corporation, representing a claim on part of the company's profits and conferring voting rights.