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 debt ratio increased.

Question

Quizplus · Accepted Answer

Paying off short-term notes payable with proceeds from new common stock will increase the company's equity and decrease its liabilities, which will increase the current ratio.

Casey Communications Recently Issued New Common Stock and Used the Proceeds