Click here to read the eBook: Profitability Ratios Problem Walk-Through RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $750,000, a net income of $75,000, and the following balance sheet: Cash $155,325 Accounts payable $114,000 Receivables 225,150 Notes payable to bank 105,450 Inventories 655,500 Total current liabilities $219,450 Total current assets $1,035,975 Long-term debt 203,775 Net fixed assets 389,025 Common equity 1,001,775 Total assets $1,425,000 Total liabilities and equity $1,425,000 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, 2.25x, without affecting sales or net income. a. If inventories are sold and not replaced (thus reducing the current ratio to 2.25x); 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. b. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places. Check My Worl remaining)