Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. 4-15 the new owner thinks that inventories are exc

4-15 The new owner thinks that inventories are excessive and can be lowered to the...

90.2K

Verified Solution

Question

Accounting

image
image
4-15 The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2.5x); if the funds generated are used to reduce common equity (stock can be repurchased at book value); and if no other changes occur, by how much will the ROE change? What will be the firm's new quick ratio? I 4-15 RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: Cash $ 10,000 Accounts payable $ 30,000 Receivables 50,000 Notes payable to bank 20,000 Inventories 150,000 Total current liabilities $ 50,000 Total current assets $210,000 Long-term debt 50,000 Net fixed assets 90,000 Common equity 200,000 Total assets $300,000 Total liabilities and equity $300,000

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Briefly outline the processes of mitochondrial fission and fusion; and how dysregulation or disruption of these...

Biology
Q

An English word is called palindrome if its meaning may be interpreted the same way in either...

Programming
Q

There are various specialized organs and glands all through the body which require their own specialized...

Medical Sciences
Q

Stock prices: Following are the closing prices of a particular stock for each trading day in...

Basic Math
Q

Drag and drop the terms to complete the concepts of genes and proteins describes the...

Biology
Q

Resistance R and R are 52 and 5 30 respectively Reactance of inductor is 5...

Physics
Q

It is Meech Lake all over but the talks are conducted on a hot air...

Physics
Q

On Wednesday, a local hamburger shop sold a combined total of 576 hamburgers and cheeseburgers....

Basic Math
Q

The theoretical probability of a coin landing heads up is Does this probability mean...

Basic Math
Q

Shauna Coleman is single. She is employed as an architectural designer for Streamline Design (SD)....

Accounting
Q

an asset has a basic cost of 5000 and zero market value at the end...

Finance
Q

Period 2017 2018 2019 2020 Performance Inflation (CPI) 14% 2% 2% 1% 10% 2% -2%...

Finance