eBook H Problem Walk-Through Lloyd Inc. has sales of $750,000, a net income of $52,500, and the following balance sheet: Cash Receivables Inventories $ 118,800 Accounts payable 178,800 Notes payable to bank 648,000 Total current liabilities 254,400 Common equity Total current assets $ 945,600 Long-term debt Net fixed assets Total assets $1,200,000 Total liabilities and equity $ 141,600 79,200 $ 220,800 194,400 784,800 $1,200,000 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. 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. ROE will increase: by 6.52 percentage points. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places. Hide Feedback