Problem Two: Cash Levels and Current Ratio
Indicate the Effect

question 77

Essay

Problem Two: Cash Levels and Current Ratio
Indicate the effect of the following actions on cash levels and current ratio. Assume the company has a current ratio greater than one. Indicate whether the effect is to increase (I), decrease (D) or if it has no effect (NE). Consider each action independently of others. $$\begin{array} { | l | c|c|} \hline &\text { Current Ratio}&{ Cash }\\\hline \text { Increased credit limits to maintain sales levels } &\\\hline \text { Convert to just-in-time inventory system } \\\hline \begin{array} { l } \text { Change from FIFO to weighted average inventory } \\\text { method (rising prices) }\end{array} \\\hline \text { Pay suppliers more slowly } \\\hline \text { Sell accounts receivable at face value } \\\hline \text { Capitalize leases that were previously called } \\\text { operating leases } \\\hline \text { Increase bad debt expense } \\\hline \text { Sell equity } \\\hline \text { Issue stock dividend } \\\hline \text { Write down inventory } \\\hline\end{array}$$

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Definitions:

Denisovans

An extinct species or subspecies of archaic humans in the genus Homo, known primarily from their DNA extracted from fossil remains found in Siberia.

Neanderthals

An extinct species of human, closely related to modern humans, that lived in Europe and parts of Asia until approximately 40,000 years ago.

Hominin Tools

Tools made by hominins, ancestors of modern humans, used to aid in activities such as hunting, processing food, and constructing shelters.

Left Africa

Refers to the migration of Homo sapiens out of Africa approximately 60,000 to 80,000 years ago, leading to the eventual global distribution of humans.