Lloyd Inc. has sales of $600,000, a net income of $36,000, and the following balance sheet: $ Cash Receivables Inventories 70,380 Accounts payable 174,420 Notes payable to bank 408,000 Total current liabilities $ 652,800 Long-term debt. 367,200 Common equity $1,020,000 Total liabilities and equity 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. $ 99,960 53,040 $ 153,000 201,960 665,040 $1,020,000 Total current assets Net fixed assets Total assets

Lloyd Inc. has sales of $600,000, a net income of $36,000, and the following balance sheet: $ Cash Receivables Inventories 70,380 Accounts payable 174,420 Notes payable to bank 408,000 Total current liabilities $ 652,800 Long-term debt. 367,200 Common equity $1,020,000 Total liabilities and equity 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. $ 99,960 53,040 $ 153,000 201,960 665,040 $1,020,000 Total current assets Net fixed assets Total assets

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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