At the end of last year,Cessa Company had total assets in the amount of $4,000,000 and total liabilities in the amount of $3,000,000.The company sold stock to new stockholders for $1,000,000.As a direct result of this transaction,the:
A)the debt-to-assets ratio will decrease.
B)asset turnover will increase.
C)net profit margin will increase.
D)net profit margin will decrease.

Question

Quizplus · Accepted Answer

The debt-to-assets ratio is calculated by dividing total liabilities by total assets. By selling stock and receiving $1,000,000, the company is increasing its total assets to $5,000,000 without increasing its liabilities, which means that the debt-to-assets ratio will decrease.

At the End of Last Year,Cessa Company Had Total Assets