Respuesta :
The transaction would worsen the current ratio and improve the debt to assets ratio, in effect, the long-term solvency of the company is enhanced, it is recommendable that the president accepts the deal
What is the classification of equipment for Lunar equipment?
The equipment being sold by Lunar equipment is current asset, since it is an inventory to be sold to customers
By selling the equipment based on the arrangement proposed by the sales manager, the equipment is $20,000 would leave inventory and it becomes an asset loan which would be seen a fixed asset or non-current asset because payment is to be made over 5 years, as a result, the current ratio, which is determined as current assets divided by current liabilities would worsen, because the numerator, current assets would reduce by $20,000
However, the debt to assets ratio would improve since the $20,000 would be become a fixed asset, which means that the denominator, non-current assets would increase $20,000, this indicates that the company is now financed by lesser amount of external funds.
It is advisable that the president accepts the arrangement because it would improve the long-term outlook of the company from debt to assets' point of view.
Find out more about debt to assets ratio on:https://brainly.com/question/11565869
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