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Lloyd Inc. has sales of $700,000, a net income of $70,000, and the following balance...

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Finance

Lloyd Inc. has sales of $700,000, a net income of $70,000, and the following balance sheet:

Cash $ 92,960 Accounts payable $ 105,280
Receivables 151,200 Notes payable to bank 49,280
Inventories 582,400 Total current liabilities $ 154,560
Total current assets $ 826,560 Long-term debt 140,000
Net fixed assets 293,440 Common equity 825,440
Total assets $ 1,120,000 Total liabilities and equity $ 1,120,000

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, 1.75, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 1.75), 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 by percentage points.

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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