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.What would occur as a result of this action?
A)The company's current ratio would increase.
B)The company's times-interest-earned ratio would decrease.
C)The company's basic earning power ratio would increase.
D)The company's equity multiplier would increase.

Question

Quizplus · Accepted Answer

By using the proceeds from the new common stock issuance to pay off some of its short-term notes payable, Casey Communications would decrease its current liabilities without affecting its assets or operating income. This would increase the company's current ratio, a measure of its ability to pay off short-term obligations.

Casey Communications Recently Issued New Common Stock and Used the Proceeds