On June 30,19X1,the Alexander Bosh Coffee Co.'s balance sheet and income statement are as follows:
a.Calculate the current ratio and net working capital for Alexander Bosh.
b.Recalculate the ratios from (a)and assess the change in the firm's liquidity if the firm plans to issue $500,000 in common stock and use the proceeds to retire the firm's notes payable.
c.What effect would the change proposed in question b have on return on common equity (net income/common equity)?

Question

On June 30,19X1,the Alexander Bosh Coffee Co.'s balance sheet and income statement are as follows:  
a.Calculate the current ratio and net working capital for Alexander Bosh.
b.Recalculate the ratios from (a)and assess the change in the firm's liquidity if the firm plans to issue $500,000 in common stock and use the proceeds to retire the firm's notes payable.
c.What effect would the change proposed in question b have on return on common equity (net income/common equity)?

Quizplus · Accepted Answer

The Answer of On June 30,19X1,the Alexander Bosh Coffee Co.'s balance sheet and income statement are as follows:  
a.Calculate the current ratio and net working capital for Alexander Bosh.
b.Recalculate the ratios from (a)and assess the change in the firm's liquidity if the firm plans to issue $500,000 in common stock and use the proceeds to retire the firm's notes payable.
c.What effect would the change proposed in question b have on return on common equity (net income/common equity)?