At the end of last year,Ace Company had total assets in the amount of $6,000,000 and total liabilities in the amount of $4,000,000.The company issued shares to new stockholders at the beginning of the current year for $1,000,000.As a direct result of this transaction,the:
A)debt-to-assets ratio will increase.
B)debt-to-assets ratio will decrease.
C)net profit margin ratio will increase.
D)net profit margin ratio will decrease.

Question

Quizplus · Accepted Answer

Stock issuance causes an increase in total assets and an increase in stockholders' equity.The increase in total assets would cause a decrease in the debt-to-assets ratio (because the denominator increases),and no change in the net profit margin (because a stock issuance does not affect Sales or Net Income).

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