The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current
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Question:
The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.70, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?
a. 4.28%
b. 4.50%
c. 4.73%
d. 4.96%
e. 5.21%
Related Book For
Statistics The Art and Science of Learning from Data
ISBN: 978-0321755940
3rd edition
Authors: Alan Agresti, Christine A. Franklin
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