Impact of Paying Off a Liability on Debt-to-Asset Ratio: An Illustrative Example - Prof. C, Study notes of Accounting

Download Impact of Paying Off a Liability on Debt-to-Asset Ratio: An Illustrative Example - Prof. C and more Study notes Accounting in PDF only on Docsity! What happens to the debt to asset ratio if we pay off a $50 liab? Before assets= 100 Liab= 150 150/100= 1.5 After Assets=50 Liab= 100 100/50=2 Pg. 260-261 Current assets and liab Chap 8 SEC- gives power to FASB to make accountinf rules - estab after the great depression - requires public companies to file financial statements SARBANES OXLEY ACT -focuses on enron -focuses on internal control -auditor ethic standards CEO responsibility - est public company - oversight accounting board PCHOB - issue and outstanding stock earnings per share (net income- p/s dividends) / avg c/s outstanding net income- p/s dividends) / avg c/s outstanding net income= 500,000 dividends declared c/s= 5,000 p/s= 10,000 shares outstanding (net income- p/s dividends) / avg c/s outstanding issued) c/s BOY 100,000 EOY 150,000 p/s BOY 200,000 EOY market price per share (net income- p/s dividends) / avg c/s outstanding 500,000-10,000)/ (net income- p/s dividends) / avg c/s outstanding 100,000+150,000)= 490,000/125,000=$3.92 DIVIDENDS YR 1 0 YR 2 10,000 YR 3 20,000 YR 4 50,000