Effect of transactions on various financial ratios. Include the effect that each transaction/event listed here will have on the financial ratio listed opposite it, and provide an explanation for your answer. Use + for increase, - for decrease, and (NE) for no effect. Assume that current assetsexceed current liabilities in all cases both before and after the transaction/event.
Transactions/event ...............Financial Ratio
Purchased inventory on account..........Number of days' sales in inventory
Sold inventory for cash, at a profit.........Inventory turnover
Issued a 10% stock dividend...........Earnings per share
Issued common stock for cash............Debt ratio
Sold land at a gain................Return on investment
Purchased treasury stock for cash..........Debt/equity ratio
Accrued interest on a note payable...........Times interest earned
Accrued wages that have been earned by employees ...Current ratio
Purchased equipment for cash ............Plant and equipment turnover
Issued bonds at an interest rate that is less than the company's ROI..Return on equity