Reference no: EM131456230

Lloyd Inc. has sales of $300,000, a net income of $30,000, and the following balance sheet: Cash $43,680 Accounts payable $88,140 Receivables 108,420 Notes payable to bank 54,600 Inventories 327,600 Total current liabilities $142,740 Total current assets $479,700 Long-term debt 118,560 Net fixed assets 300,300 Common equity 518,700 Total assets $780,000 Total liabilities and equity $780,000 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, 1.75x, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 1.75x); 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. What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places.