Question

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 to the point where the current ratio is equal to the industry average, 2×, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2×), 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.

ROE will increase/decrease by _______ percentage points.

What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places.

×

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 $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 $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 $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...
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...
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,...
The balance sheet and income statement shown below are for Koski Inc. Note that the firm...
The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) Assets 2016 Cash and securities $2,145 Accounts receivable 8,970 Inventories 12,480 Total current assets $23,595 Net plant and equipment $15,405 Total assets $39,000 Liabilities and Equity Accounts payable $7,410...
Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as...
Data for Lozano Chip Company and its industry averages follow. Lozano Chip Company: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $   220,000 Accounts payable $   600,000 Receivables 1,575,000 Notes payable 100,000 Inventories 1,155,000 Other current liabilities 540,000   Total current assets $2,950,000   Total current liabilities $1,240,000 Net fixed assets 1,325,000 Long-term debt 400,000 Common equity 2,635,000 Total assets $4,275,000 Total liabilities and equity $4,275,000 Lozano Chip Company: Income Statement for Year Ended December 31, 2019 (Thousands of Dollars) Sales...
QUESTION 8 The balance sheet and income statement shown below are for Koski Inc. Note that...
QUESTION 8 The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) Assets 2016 Cash and marketable securities $2,245 Accounts receivable 9,870 Inventories 10,480 Total current assets $22,595 Net plant and equipment $65,405 Total assets $88,000 Liabilities and Equity...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT