Problem Two: Cash Levels and Current Ratio
Indicate the Effect

Problem Two: Cash Levels and Current Ratio
Indicate the effect of the following actions on cash levels and current ratio. Assume the company has a current ratio greater than one. Indicate whether the effect is to increase (I), decrease (D) or if it has no effect (NE). Consider each action independently of others. $$\begin{array} { | l | c|c|} \hline &\text { Current Ratio}&{ Cash }\\\hline \text { Increased credit limits to maintain sales levels } &\\\hline \text { Convert to just-in-time inventory system } \\\hline \begin{array} { l } \text { Change from FIFO to weighted average inventory } \\\text { method (rising prices) }\end{array} \\\hline \text { Pay suppliers more slowly } \\\hline \text { Sell accounts receivable at face value } \\\hline \text { Capitalize leases that were previously called } \\\text { operating leases } \\\hline \text { Increase bad debt expense } \\\hline \text { Sell equity } \\\hline \text { Issue stock dividend } \\\hline \text { Write down inventory } \\\hline\end{array}$$

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