RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $700,000, a net income of $42,000, and the following balance sheet: Cash $146,300 Accounts payable $169,400 Receivables 235,620 Notes payable to bank 78,540 Inventories 539,000 Total current liabilities $247,940 Total current assets $920,920 Long-term debt 247,940 Net fixed assets 619,080 Common equity 1,044,120 Total assets $1,540,000 Total liabilities and equity $1,540,000 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, 2x, without affecting sales or net income. a. If inventories are sold and not replaced (thus reducing the current ratio to 2x); 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. % b. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places. x