At the end of the year,a company issued stock for cash and then used the cash to acquire a piece of land for future development.Which of the following is true?
A)Net profit margin ratio will decrease and debt-to assets ratio will decrease.
B)Net profit margin ratio will not change and debt-to-assets ratio will increase.
C)Net profit margin ratio will increase and debt-to-assets ratio will decrease.
D)Net profit margin ratio will not change and debt-to-assets ratio will decrease.

Question

Quizplus · Accepted Answer

Issuing stock for cash and using it to buy land does not affect net income, so the net profit margin ratio remains unchanged. The debt-to-assets ratio decreases because the transaction increases assets without increasing liabilities.

At the End of the Year,a Company Issued Stock for Cash