Return on Equity and Quick Ratio

Lloyd Inc. has sales of $500,000, a net income of $60,000, and the following balance sheet:

Cash	$68,400		Accounts payable	$99,000
Receivables	155,700		Other current liabilities	29,700
Inventories	531,000		Long-term debt	117,900
Net fixed assets	144,900		Common equity	653,400
Total assets	$900,000		Total liabilities and equity	$900,000

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, 2.25x, without affecting sales or net income.

If inventories are sold and not replaced (thus reducing the current ratio to 2.25x), 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? Round your answer to two decimal places. %

What will be the firm's new quick ratio? Round your answer to two decimal places. x