RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $400,000, a net income of $48,000, and the following balance sheet: Cash $75,400 Accounts payable $138,040 Receivables 142,680 Notes payable to bank 63,800 Inventories 568,400 Total current liabilities $201,840 Total current assets $786,480 Long-term debt 167,040 Net fixed assets 373,520 Common equity 791,120 Total assets $1,160,000 Total liabilities and equity $1,160,000 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. 6.61 % b. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places. 1.29