Question: 4-15. RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: The new

  • 4-15.
  • RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet:
  • 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, 2.5X , without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2.5X ), 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? What will be the firm's new quick ratio?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

4-14 RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: Cash $ 10,000 Accounts payable $ 30,000 Receivables 50,000 Other...

Q:

4-15 RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: Cash Receivables Inventories Total current assets Net fixed assets...

Q:

4-15 RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: Cash $ 10,000 Accounts payable $ 30,000 Receivables 50,000 Notes...

Q:

4-15 RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: Cash $ 10,000 Accounts payable $ 30,000 Receivables 50,000 Notes...

Q:

4-15 RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, the tax rate will be 35% a net income of $15,000, and the following balance sheet: Cash Receivables Inventories Total current...

Q:

4-15. Return on Equity and Quick Ratio Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: Cash $10,000 Accounts payable $30,000 Receivables 50,000 Notes...

Q:

Problem 4-15 RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $150,000, a net income of $16,500, and the following balance sheet: Cash $38,520 Accounts payable $39,240 Receivables 43,920...

Q:

4-15 RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: The new owner thinks that inventories are excessive and can be...

Q:

X Meme 4-15 RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $2.000, a net income of $15,000, and the following balance sheet: Cash $10,000 $ Receivables 20.000 Inventore 550.000 5210.000...

Q:

4-15. RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet: The new owner thinks that inventories are excessive and can be...

Q:

Romo Company spent $190,000 developing a new process, $45,000 in legal fees to obtain a patent, and $91,000 to market the process that was patented, all in the year 2017. How should these costs be...

Q:

Under what conditions would it be appropriate to us a process costing system?

Q:

basic goods

Q:

Using video games for the Great Life Refresh customer segment, create a 2-3 page well-written essay that makes specific recommendations regarding the use of social media to influence attitudes and...

Q:

=+ a. The U.S. government, fearing it may need to enter the war, increases its purchases of military equipment.

Q:

=+ c. The war makes U.S. fi rms uncertain about the future, and the fi rms delay some investment projects.

Q:

=+ b. Other countries raise their demand for hightech weapons, a major export of the United States.