RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $600,000, a net income of $54,000, and the following balance sheet: Cash $97,680 Accounts payable $126,720 Receivables 208,560 Notes payable to bank 87,120 726,000 Total current liabilities $213,840 Inventories Total current assets 224,400 $1,032,240 287,760 Long-term debt Common equity Net fixed assets 881,760 Total assets $1,320,000 Total liabilities and equity $1,320,000 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. a. 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. 6.13 % b. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places 3.43 x