Gates, Incorporated and Markham, Incorporated Each Had the Same Financial

question 150

Multiple Choice

Gates, Incorporated and Markham, Incorporated each had the same financial position on January 1, Year 2. The following is a summary of each of their balance sheets on that date: Gates is about to raise $200,000 in cash by issuing bonds. Markham is going to raise $200,000 on the same day by issuing common stock. Immediately after these transactions, which of the following statements will be correct?

• A)Gates' current ratio will be higher than Markham's.
• B)Gates' current ratio will be lower than Markham's.
• C)Gates' debt to asset ratio will be higher than Markham's.
• D)Gates' debt to asset ratio will be lower than Markham's.

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