In this exercise you will discuss the impact of cash

Reference no: EM13581103

In this exercise, you will discuss the impact of cash payment against the accounts payable on the current ratio of a company. In addition, you will perform a vertical analysis against the entries listed on the financial statement. Task 1: A company has a current ratio of two. The CFO decides to pay off a portion of its accounts payable with cash. Explain whether the current ratio will increase, decrease, or remain unchanged. Support your answer with appropriate rationale. Task 2: Based on the attached financial information, perform a vertical analysis, list the steps performed, and provide an explanation for your analysis.

Year-2010
Amount in Dollars
Sales 1,00,000
Cost of goods sold 47,500
Operating expenses 750
Selling expenses 9,500
Administrative expenses12,000
Net income 30,250

Year-2009
Sales 79,900
Cost of goods sold 39,950
Operating expenses 500
Selling expenses 9,000
Administrative expenses 12,000
Net income 18,450

Reference no: EM13581103

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