Gates, Inc. and Markham, Inc. each had the same financial position on January 1, Year 2. The following is a summary of each of their balance sheets on that date: Current assets$330,000 Non-current assets 2,970,000 Current liabilities 165,000 Non-current liabilities 1,815,000 Common stock 907,500 Retained earnings 412,500 Gates is about to raise $200,000 in cash by issuing bonds. Markham is going to raise $200,000 on the same day by issuing common stock. Immediately after these transactions, which of the following statements will be correct?
A. Gates' debt to asset ratio will be higher than Markham's.
B. Gates' current ratio will be lower than Markham's.
C. Gates' debt to asset ratio will be lower than Markham's.
D. Gates' current ratio will be higher than Markham's.
Answer: A
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