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:

Traditional Expectations

The established norms and roles that individuals are anticipated to conform to by virtue of their cultural, social, or family positioning.

Minangkabau Society

A matrilineal society in West Sumatra, Indonesia, characterized by female inheritance and property rights.

Matriarchal

A social system or family structure where the female, especially the mother, has the central role of authority and decision-making.

Economic

Relating to the production, consumption, and transfer of wealth within a society or country.