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  3. lloyd inc. has sales of $600,000, a net income of

Lloyd Inc. has sales of $600,000, a net income of $48,000, and the following balance...

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Finance

Lloyd Inc. has sales of $600,000, a net income of $48,000, and the following balance sheet:

Cash $148,680 Accounts payable $144,900
Receivables 221,760 Notes payable to bank 73,080
Inventories 655,200 Total current liabilities $217,980
Total current assets $1,025,640 Long-term debt 190,260
Net fixed assets 234,360 Common equity 851,760
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, 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.

x

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