Barrett Company Received Cash of $1,000,000 from Issuing Common Stock

Multiple Choice

Barrett Company received cash of $1,000,000 from issuing common stock. As a result of this transaction, the company's debt to equity ratio will:

A) Increase.
B) Decrease.
C) Remain the same.
D) Cannot be determineD.The transaction will increase assets (cash) and increase stockholders' equity (common stock) . The debt to equity ratio is total debt/total stockholders' equity. The increase in cash will not affect the ratio, but the increase in common stock will cause the ratio to go down.