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Effects of Transactions Upon Analytical Measurements
Determine the Immediate Effect

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Effects of transactions upon analytical measurements
Determine the immediate effect of each of the transactions described below on the ratio listed beside each transaction. In the blank space to the left of each statement, you are to indicate the effect by writing the appropriate code letter. The code letters are as follows: I = increase the ratio, D = decrease the ratio, and NE = no effect on this ratio.
 Return on common stockholders’ equity (13%) : Issued 10% bonds and  invested the proceeds to earn 12% Return on total assets (13%): Issued 10% bonds and invested the proceeds to  earn 12% Accounts receivable turnover ratio ( 4 times): Shortened credit period from 60 days to 30 days and raised standards for accepting credit customers.  Earnings per share of common stock ($6.25) : Sold common stock held in the  treasury at a price above cost.  Inventory turnover ( 4 times): Made large purchases increasing the average  size of inventory.  Current ratio (2.1 to 1) : Collected a large account receivable  Quick ratio: Wrote off an uncollectible account receivable against the  allowance account.  Debt ratio: Declared a cash dividend, to be paid in three months. \begin{array}{|c|c|}\hline \underline{\quad\quad}& \begin{array}{l}\text { Return on common stockholders' equity }(13 \%) \text { : Issued } 10 \% \text { bonds and } \\\text { invested the proceeds to earn } 12 \% \text {. }\end{array} \\\hline\underline{\quad\quad} & \begin{array}{l}\text { Return on total assets (13\%): Issued } 10 \% \text { bonds and invested the proceeds to } \\\text { earn } 12 \% \text {. }\end{array} \\\hline\underline{\quad\quad} & \begin{array}{l}\text { Accounts receivable turnover ratio ( } 4 \text { times): Shortened credit period from } 60 \\\text { days to } 30 \text { days and raised standards for accepting credit customers. }\end{array} \\\hline\underline{\quad\quad} & \begin{array}{l}\text { Earnings per share of common stock }(\$ 6.25) \text { : Sold common stock held in the } \\\text { treasury at a price above cost. }\end{array} \\\hline\underline{\quad\quad} & \begin{array}{l}\text { Inventory turnover ( } 4 \text { times): Made large purchases increasing the average } \\\text { size of inventory. }\end{array} \\\hline \underline{\quad\quad}& \text { Current ratio (2.1 to } 1) \text { : Collected a large account receivable } \\\hline \underline{\quad\quad}& \begin{array}{l}\text { Quick ratio: Wrote off an uncollectible account receivable against the } \\\text { allowance account. }\end{array} \\\hline\underline{\quad\quad} & \text { Debt ratio: Declared a cash dividend, to be paid in three months. } \\\hline\end{array}


Definitions:

Ethics Issues

Problems or situations that require individuals or organizations to choose between actions that are evaluated as right or wrong.

FSGO

The Federal Sentencing Guidelines for Organizations, a framework that incentivizes organizations in the United States to install and maintain ethics and compliance programs to mitigate punishment for offenses.

Ethical Compliance

Adhering to laws, regulations, standards, and ethical practices that are applicable to an organization's operations and conduct.

Probation

A period of supervision over an offender, ordered by the court instead of serving time in prison.

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