Casey Communications recently issued new common stock and used the proceeds to pay off some of its short-term notes payable.This action had no effect on the company's total assets or operating income.Which of the following effects would occur as a result of this action?
A)The company's current ratio increased.
B)The company's times interest earned ratio decreased.
C)The company's basic earning power ratio increased.
D)The company's equity multiplier increased.
E)The company's total debt to total capital ratio increased.

Question

Quizplus · Accepted Answer

Issuing new common stock and using the proceeds to pay off short-term notes payable would decrease the company's current liabilities and increase its equity, which would lead to an increase in the current ratio. None of the other ratios listed would be directly affected by this action.

Casey Communications Recently Issued New Common Stock and Used the Proceeds