Lloyd Inc. has sales of $600,000, a net income of $48,000, and the following balance...
60.1K
Verified Solution
Link Copied!
Question
Finance
Lloyd Inc. has sales of $600,000, a net income of $48,000, and the following balance sheet:
Cash
$148,680
Accounts payable
$144,900
Receivables
221,760
Notes payable to bank
73,080
Inventories
655,200
Total current liabilities
$217,980
Total current assets
$1,025,640
Long-term debt
190,260
Net fixed assets
234,360
Common equity
851,760
Total assets
$1,260,000
Total liabilities and equity
$1,260,000
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, 1.75x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 1.75x); 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? Do not round intermediate calculations. Round your answer to two decimal places.
%
What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places.
x
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!
