Lloyd Inc has sales of $200,000, a net income of $22,000, and the following balance sheet Cash $ 27,720 Accounts payable $ 37,800 Receivables 69,720 Notes payable to bank 26,880 Inventories 247,800 Total current liabilities $ 64,680 Total current assets $ 345,240 Long term debt 56,280 Net fixed assets 74,760 Common equity 299,040 Total assets $ 420,000 Total liabilities and equity $ 420,000 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, without affecting sales or net income If inventories are sold and not replaced (thus reducing the current ratio to 2), 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 or decrease by percentage points What will be the firm's new quick ratio Do not round intermediate calculations Round your answer to two decimal places

Question

Lloyd Inc  has sales of $200,000, a net income of $22,000, and the following balance sheet  Cash $ 27,720 Accounts payable $ 37,800 Receivables 69,720 Notes payable to bank 26,880 Inventories 247,800 Total current liabilities $ 64,680 Total current assets $ 345,240 Long term debt 56,280 Net fixed assets 74,760 Common equity 299,040 Total assets $ 420,000 Total liabilities and equity $ 420,000 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, without affecting sales or net income  If inventories are sold and not replaced (thus reducing the current ratio to 2), 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 or decrease by      percentage points  What will be the firm's new quick ratio  Do not round intermediate calculations  Round your answer to two decimal places

Accepted Answer

The Answer is in the image, click to view ...

Question

Lloyd Inc. has sales of $200,000, a net income of $22,000, and the following balance sheet: Cash $ 27,720 Accounts payable $ 37,800 Receivables 69,720

Step by Step Solution

Step: 1

Get Instant Access to Expert-Tailored Solutions

Step: 2

Step: 3

Ace Your Homework with AI

Recommended Textbook for

The Risk Modeling Evaluation Handbook Rethinking Financial Risk Management Methodologies In The Global Capital Markets

Students also viewed these Finance questions

Question

Question

Question

Question

Question

Question

Question

Question

Question

Cash	$	27,720	Accounts payable	$	37,800
Receivables		69,720	Notes payable to bank		26,880
Inventories		247,800	Total current liabilities	$	64,680
Total current assets	$	345,240	Long-term debt		56,280
Net fixed assets		74,760	Common equity		299,040
Total assets	$	420,000	Total liabilities and equity	$	420,000