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May 22, 2015

Homework Help: Advanced Accounting

Posted by Eugene on Tuesday, September 11, 2007 at 10:38am.

Time had a bad year in 2001; the company suffered a net loss. The loss pushed most of the return measures into the negative column, and the current ratio dropped below 1.0. The company's debt ratio is still only .27. Assume top management of Time is pondering ways to improve the company's ratios. In particular, management is considering the following transactions:

1. Borrow 100 million of long-term debt
2. Purchase treasury stock for $500 million cash
3. Expense on-fourth of goodwill carried on the books at $128 million
4. Sell advertising, and the advertisements will run immediately
5. Purchase tradmarks from NBC, paying $20 million cash

required
Top management wants to know the effects of these transactions (increase, decrease, or no effect) on the following ratios of Time:
a. current ratio b. debt ratio c. Return on Equity

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