Selected ratios for Hurtal Corporation for year ended Year 1 are:
$\begin{array}{ll}
\text { Debt-to-equity } & 0.8 \
\text { Times interest earned } & 3.0 \
\text { Current ratio } & 1.2 \
\text { Cash flow to fixed charges } & 2.8
\end{array}$
Below is a set of transactions that are not reflected in the ratios above. Consider each transaction independently and indicate its effect on the above ratios. Explain your answer.

1. Decrease in tax rate for Year 1
2. Issued $1,000 in common stock to repay $1,000 of long-term debt at beginning of Year 1.
3. Useful life of depreciable assets was increased at beginning of Year 1.

Question

Selected ratios for Hurtal Corporation for year ended Year 1 are:
$\begin{array}{ll}
\text { Debt-to-equity } & 0.8 \
\text { Times interest earned } & 3.0 \
\text { Current ratio } & 1.2 \
\text { Cash flow to fixed charges } & 2.8
\end{array}$
Below is a set of transactions that are not reflected in the ratios above. Consider each transaction independently and indicate its effect on the above ratios. Explain your answer.

1. Decrease in tax rate for Year 1
2. Issued $1,000 in common stock to repay $1,000 of long-term debt at beginning of Year 1.
3. Useful life of depreciable assets was increased at beginning of Year 1.

Quizplus · Accepted Answer

The Answer of Selected ratios for Hurtal Corporation for year ended Year 1 are:
$\begin{array}{ll}
\text { Debt-to-equity } & 0.8 \
\text { Times interest earned } & 3.0 \
\text { Current ratio } & 1.2 \
\text { Cash flow to fixed charges } & 2.8
\end{array}$
Below is a set of transactions that are not reflected in the ratios above. Consider each transaction independently and indicate its effect on the above ratios. Explain your answer.

1. Decrease in tax rate for Year 1
2. Issued $1,000 in common stock to repay $1,000 of long-term debt at beginning of Year 1.
3. Useful life of depreciable assets was increased at beginning of Year 1.

Selected Ratios for Hurtal Corporation for Year Ended Year 1