If Total Liabilities Increased by $25,000 and Shareholders' Equity Increased

question 36

Multiple Choice

If total liabilities increased by $25,000 and shareholders' equity increased by $5,000 during a period, then total assets must change by what amount and direction during that same period?

• A) $20,000 decrease.
• B) $20,000 increase.
• C) $25,000 increase.
• D) $30,000 increase.

Understand the concept and calculation of liquidity ratios including the current ratio.

Calculate and interpret the average collection period and receivables turnover ratio.

Differentiate between liquidity, solvency, profitability, and leverage ratios.

Analyze the impact of business transactions on liquidity ratios.

---

Definitions:

Metaphor

A figure of speech in which a word or phrase is applied to an object or action to which it is not literally applicable, often used to help explain complex or abstract concepts.

Transformational Leader

An individual who inspires and motivates followers to achieve extraordinary outcomes by transforming their attitudes, beliefs, and values.

Self-Interest

Acting in a way that is beneficial to oneself, focusing on actions that promote individual interests and well-being.

Charismatic

Having a compelling charm or appeal that inspires devotion or admiration in others.