Question

Muscarella Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable...

Muscarella Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 210,000 Total CL $ 70,000 Total CA $294,000 Long-term debt 70,000 Net fixed assets 126,000 Common equity 280,000 Total assets $420,000 Total liab. and equity $420,000 Sales $280,000 Net income $ 21,000 The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.40, 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? Select the correct answer.

a. 5.71%
b. 4.85%
c. 6.14%
d. 4.42%
e. 5.28%
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Lloyd Inc. has sales of $450,000, a net income of $36,000, and the following balance sheet:...
Lloyd Inc. has sales of $450,000, a net income of $36,000, and the following balance sheet: Cash $148,770    Accounts payable $117,450 Receivables 244,035    Notes payable to bank 71,775 Inventories 613,350    Total current liabilities $189,225 Total current assets $1,006,155    Long-term debt 207,495 Net fixed assets 298,845    Common equity 908,280 Total assets $1,305,000    Total liabilities and equity $1,305,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current...
Lloyd Inc. has sales of $500,000, a net income of $35,000, and the following balance sheet:...
Lloyd Inc. has sales of $500,000, a net income of $35,000, and the following balance sheet: Cash $ 144,450    Accounts payable $ 141,750 Receivables 194,400    Notes payable to bank 102,600 Inventories 499,500    Total current liabilities $ 244,350 Total current assets $ 838,350    Long-term debt 189,000 Net fixed assets 511,650    Common equity 916,650 Total assets $ 1,350,000    Total liabilities and equity $ 1,350,000 The new owner thinks that inventories are excessive and can be lowered...
Lloyd Inc. has sales of $750,000, a net income of $67,500, and the following balance sheet:...
Lloyd Inc. has sales of $750,000, a net income of $67,500, and the following balance sheet: Cash $168,000 Accounts payable $171,000 Receivables 261,000 Notes payable to bank 45,000 Inventories 855,000 Total current liabilities $216,000 Total current assets $1,284,000 Long-term debt 249,000 Net fixed assets 216,000 Common equity 1,035,000 Total assets $1,500,000 Total liabilities and equity $1,500,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry...
Lloyd Inc. has sales of $400,000, a net income of $32,000, and the following balance sheet:...
Lloyd Inc. has sales of $400,000, a net income of $32,000, and the following balance sheet: Cash $86,400    Accounts payable $97,200 Receivables 146,880    Notes payable to bank 37,800 Inventories 421,200    Total current liabilities $135,000 Total current assets $654,480    Long-term debt 214,920 Net fixed assets 425,520    Common equity 730,080 Total assets $1,080,000    Total liabilities and equity $1,080,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current...
Lloyd Inc. has sales of $200,000, a net income of $18,000, and the following balance sheet:...
Lloyd Inc. has sales of $200,000, a net income of $18,000, and the following balance sheet: Cash $ 59,940    Accounts payable $ 50,220 Receivables 65,340    Notes payable to bank 21,600 Inventories 318,600    Total current liabilities $ 71,820 Total current assets $ 443,880    Long-term debt 82,620 Net fixed assets 96,120    Common equity 385,560 Total assets $ 540,000    Total liabilities and equity $ 540,000 The new owner thinks that inventories are excessive and can be lowered...
Balance Sheet Cash&MS- 30,000 Accruals- 20,000 Receivables- 70,000 Accounts Payable- 60,000 Inventories- 120,000 Notes Payable- 80,000...
Balance Sheet Cash&MS- 30,000 Accruals- 20,000 Receivables- 70,000 Accounts Payable- 60,000 Inventories- 120,000 Notes Payable- 80,000 Fixed Assets- 480,000 L-T Liabilities- 140,000 Total Assets= 700,000 Common Equity- 400,000 Annual Sales- 1,400,000 Cost of Goods Sold- 960,000 Net Income- 63,000 Number of Shares Outstanding- 30,000 What is the current ratio, debt ratio, total asset turnover ratio of the firm? What is the days sales outstanding (DSO) of the firm? (Use a 360-day year.) What is the profit margin of the firm?...
RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $650,000, a net income of...
RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $650,000, a net income of $78,000, and the following balance sheet: Cash $130,390    Accounts payable $110,500 Receivables 218,790    Notes payable to bank 88,400 Inventories 430,950    Total current liabilities $198,900 Total current assets $780,130    Long-term debt 204,425 Net fixed assets 324,870    Common equity 701,675 Total assets $1,105,000    Total liabilities and equity $1,105,000 The new owner thinks that inventories are excessive and can be lowered...
RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $300,000, a net income of...
RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $300,000, a net income of $33,000, and the following balance sheet: Cash $38,400 Accounts payable $52,800 Receivables 84,480 Notes payable to bank 20,640 Inventories 211,200 Total current liabilities $73,440 Total current assets $334,080 Long-term debt 88,800 Net fixed assets 145,920 Common equity 317,760 Total assets $480,000 Total liabilities and equity $480,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current...
The Balance Sheet and the Income Statement for ABC Manufacturing Corporation are as follows: DATA (All...
The Balance Sheet and the Income Statement for ABC Manufacturing Corporation are as follows: DATA (All amounts in SAR unless otherwise indicated, all sales are on credit and no hard keys.) Balance Sheet: ABC Corporation Balance Sheet Other current assets Total current assets Gross fixed assets Accumulated depreciation Net fixed assets Total assets LIABILITIES (DEBT) AND EQUITY Accounts payable Short-term notes payable Total current liabilities Long-term debt Total liabilities Common stock (par & paid in capital) Retained earnings Total common...
A company has the following income statement and balance sheet: INCOME STATEMENT Sales $1,000 Costs 600...
A company has the following income statement and balance sheet: INCOME STATEMENT Sales $1,000 Costs 600 Depreciation 240 EBIT $ 160 Interest expenses 60 EBT $ 100 Taxes (40%) 40 Net income $ 60 BALANCE SHEET Cash $ 20 Accounts payable $ 30 Short-term investments 30 Accruals 50 Accounts receivable 20 Notes payable 10 Inventory 60 Current liabilities 90 Current assets 130 Long-term debt 70 Gross fixed assets 140 Common stock 30 Accumulated deprec. 40 Retained earnings 40 Net fixed...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT