Cindy Green, owner of "Gardens for You" has questions regarding financial results of the company. The return on sales ratio is 25% and the gross margin ratio is 65%. She has read that others in this industry have higher ratio's and is concerned that she might not be as profitable as she should be. She asked that you explain the effects of the following transactions on her ratios:
Specify if the transaction will have no effect, increase, or decrease the ratio and explain each choice so that each effect can be understood.
a. Purchase of fence wire.
b. Billing a customer on account.
c. Paying her employees on pay day.
d. Receiving the utility bill for electricity.
e. Purchasing a new post hole digger.
f. Borrowing $5,000 cash from the bank.
g. Cindy Green puts $3,000 cash in the company account from her personal account.