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Lloyd Inc. has sales of $700,000, a net income of $35,000, and the following balance sheet: Cash $ 99,540 Accounts payable $ 117,180 Receivables 156,240
Lloyd Inc. has sales of $700,000, a net income of $35,000, and the following balance sheet: Cash $ 99,540 Accounts payable $ 117,180 Receivables 156,240 Notes payable to bank 52,920 Inventories 567,000 Total current liabilities $ 170,100 Total current assets $ 822,780 Long-term debt 196,560 Net fixed assets 437,220 Common equity 893,340 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, 2x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2x), 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 -Select- by percentage points. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places
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