Lloyd Inc. has sales of $150,000, a net income of $16,500, and the following balance sheet: Cash $17,820 Accounts payable $32,400 Receivables 46,170 Notes payable to bank 9,180 Inventories 153,900 Total current liabilities $41,580 Total current assets $217,890 Long-term debt 38,070 Net fixed assets 52,110 Common equity 190,350 Total assets $270,000 Total liabilities and equity $270,000 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, 1.75x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 1.75x); 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. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places.
Lloyd Inc. has sales of $150,000, a net income of $16,500, and the following balance sheet: Cash $17,820 Accounts payable $32,400 Receivables 46,170 Notes payable to bank 9,180 Inventories 153,900 Total current liabilities $41,580 Total current assets $217,890 Long-term debt 38,070 Net fixed assets 52,110 Common equity 190,350 Total assets $270,000 Total liabilities and equity $270,000 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, 1.75x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 1.75x); 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. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Lloyd Inc. has sales of $150,000, a net income of $16,500, and the following balance sheet:
Cash
$17,820
Accounts payable
$32,400
Receivables
46,170
Notes payable to bank
9,180
Inventories
153,900
Total current liabilities
$41,580
Total current assets
$217,890
Long-term debt
38,070
Net fixed assets
52,110
Common equity
190,350
Total assets
$270,000
Total liabilities and equity
$270,000
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, 1.75x,
without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 1.75x); 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.
What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd41b9587-58c1-412a-80e3-ad0c73e3cfd9%2Fb62ab18f-be5c-418c-ac86-a8292f927f58%2Fkenmpb.png&w=3840&q=75)
Transcribed Image Text:Lloyd Inc. has sales of $150,000, a net income of $16,500, and the following balance sheet:
Cash
$17,820
Accounts payable
$32,400
Receivables
46,170
Notes payable to bank
9,180
Inventories
153,900
Total current liabilities
$41,580
Total current assets
$217,890
Long-term debt
38,070
Net fixed assets
52,110
Common equity
190,350
Total assets
$270,000
Total liabilities and equity
$270,000
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, 1.75x,
without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 1.75x); 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.
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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