At the End of Last Year,Ace Company Had Total Assets

question 13

Multiple Choice

At the end of last year,Ace Company had total assets in the amount of $6,000,000 and total liabilities in the amount of $4,000,000.The company issued shares to new stockholders at the beginning of the current year for $1,000,000.As a direct result of this transaction,the:

• A)debt-to-assets ratio will increase.
• B)debt-to-assets ratio will decrease.
• C)net profit margin ratio will increase.
• D)net profit margin ratio will decrease.

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Definitions:

Capital Intensity Ratio

A financial measure that indicates the amount of assets or capital required to generate a dollar of revenue, illustrating the capital efficiency of a company.

Asset Efficiency

A measure of how effectively a company utilizes its assets to generate revenue.

Percentage of Sales Approach

A financial planning method that uses a specified percentage of sales or revenues to forecast future financial needs or growth requirements.

Variable Expenses

Costs that change in proportion to the activity or business volume.