The Cavendish Company Recently Issued New Common Stock and Used

question 95

Multiple Choice

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

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Definitions:

Property Interest

A legal right or interest in a tangible or intangible object, which provides the holder certain privileges regarding the use, disposition, and possession of the property.

Restrict

To limit or control the size, amount, or range of something through regulations or conditions.

Uniform Commercial Code

A comprehensive set of laws governing commercial transactions in the United States, designed to harmonize the law of sales and other commercial contracts.

Unconscionable

A term used to describe an agreement or term within an agreement that is so unjust or overwhelmingly one-sided in favor of one party that it is deemed unenforceable under the law.