Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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: The new
- 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:
- 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?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
