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.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 49E
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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
%
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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