[jaconn]

What are the effects of the following actions on the company's current ratio, acid-test ratio and debt to equity ratio (I=Increase, D=Decrease, N=No affect).

1:Issuance of long-term bonds
2:Issuance of short-term notes
3:Retirement of bonds

Thanks for any help!

[morgaine300]

First you need to make sure you know those 3 equations and they should all be in your book.

Then you need to know what the entry would be for each one. Not necessarily debits and credits, but know what accounts would be affected and whether it goes up or down. Then know what type of account that is, including sub-category. That will tell you whether it will affect something in each of the 3 equations. That's what you're looking for.

If you can't figure out the affect of it without having numbers, then make something up and test it.

Just for example. If I paid an account payable with cash, that would reduce cash and reduce accounts payable, which are, respectively, a current asset and a current liability. Therefore, that would affect working capital, reducing both current assets and current liabilities. It would affect acid-test ratio by reducing a quick asset and a current liability. It would also affect the debt to equity ratio by reducing liabilities. (Cash has no affect on that one.) (Some books will do small difference in these equations, so this is assuming your equation for that last one includes all liabilities.)

Give it a try.