Question

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 ratio is equal to the industry average, 2.5x, without affecting sales or net income.

A) 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? 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.

Could you show the work in excel so I can practice it.

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
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...
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...
Long-term debt ratio 0.1 Times interest earned 8.0 Current ratio 1.4 Quick ratio 1.0 Cash ratio...
Long-term debt ratio 0.1 Times interest earned 8.0 Current ratio 1.4 Quick ratio 1.0 Cash ratio 0.4 Inventory turnover 4.0 Average collection period 73 days Use the above information from the tables to work out the following missing entries, and then calculate the company’s return on equity. Note: Turnover and the average collection period are calculated using start-of-year, not average, values. (Enter your answers in millions. Round intermediate calculations and final answers to 2 decimal places.) Long-term debt ratio 0.1...
SME Company has a debt-equity ratio of .70. Return on assets is 8.5 percent, and total...
SME Company has a debt-equity ratio of .70. Return on assets is 8.5 percent, and total equity is $540,000.    a. What is the equity multiplier? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the return on equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the net income? (Do not round intermediate calculations and round...
Current and Quick Ratios Ace Industries has current assets equal to $2 million. The company's current...
Current and Quick Ratios Ace Industries has current assets equal to $2 million. The company's current ratio is 2.0, and its quick ratio is 1.5. What is the firm's level of current liabilities? What is the firm's level of inventories? Do not round intermediate calculations. Round your answers to the nearest dollar. Current liabilities: $ Inventories: $
Calculate the current ratio and the quick ratio for the following partial financial statement for Tootsie...
Calculate the current ratio and the quick ratio for the following partial financial statement for Tootsie Roll. (Round your answers to the nearest hundredth.) Assets Liabilities Current assets: Current liabilities: Cash and cash equivalents (Note 1) $ 4,144,190 Notes payable to banks $ 752,221 Investments (Note 1) 32,453,769 Accounts payable 7,084,075 Accounts receivable, less allowances of $740,000 and $736,000 16,126,648 Dividends payable 656,607 Inventories (Note 1): Accrued liabilities (Note 5) 9,906,534 Finished goods and work in progress 12,570,955 Income taxes...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT