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Effects of events on financial ratios

The following balances were taken from the October 31, 2008, balance sheet of Hewlett-Packard (dollars in millions).

Current assets


Long-term assets


Current liabilities


Long-term liabilities


Shareholders” equity


Early in fiscal 2009, Hewlett-Packard considered the financial effects of several events.


For each of the five events listed here, indicate how they would affect the financial ratios listed by completing the following chart. Assume that financial statements are prepared immediately after each event. Treat each event independently, and use the following key: Increase (+), Decrease (–), and No Effect (NE).

Net Income Shareholders”

Current Assets Current Liabilities

Total Liabilities Shareholders” Equity

1. Purchase inventory on account.

2. Sell assets for cash at a gain.

3. 2. Provide services to customers, receiving
cash in return.

4. Make a principal payment on an

Outstanding Long term liability.

5. Issue common stock for cash.

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