Lloyd Inc. has sales of $150,000, a net income of $16,500, and the following balance sheet:CashReceivablesInventoriesTotal current assetsNet fixed assetsTotal assetsThe new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5x, without affecting sales or netincome. If inventories are sold and not replaced (thus reducing the current ratio to 2.5x), if the funds generated are used to reduce common equity (stock can be repurchased atbook value), and if no other changes occur, by how much will the ROE change? Do not round intermediate calculations. Round your answer to two decimal places.percentage points.s new quick ratio? Do not round intermediate calculations. Round your answer to two decimal places.ROE wil ✔ -Select- yincreasedecreaseWhat w$ 19,125 Accounts payable70,500 Notes payable to bank180,000 Total current liabilities$269,625 Long-term debt105,375 Common equity$375,000 Total liabilities and equity$ 31,50018,750$ 50,25073,875250,875$375,000

We have undertake a transaction bring the current ratio to the target level. This will result into…

Answered: Lloyd Inc. has sales of $150,000, a net…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Calculate Zumwalt’s net profit margin and debt ratio. Earth’s Best Company has sales of $200,000, a net income of $15,000, and the following balance sheet: . The company’s new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5, without affecting either sales or net income. If inventories are sold off and not replaced so as to reduce the current ratio to 2.5, 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? b. Now suppose we wanted to take this problem and modify it for use on an exam—that is, to create a new problem that you have not seen to test yourknowledge of this type of problem. How would your answer change if we made the following changes: (1) We doubled all of the dollar amounts? (2) We stated that the target current ratio was 3.0? (3) We said that the company had 10,000 shares of…
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Assets Liabilities and Owners' Equity Accounts and notes payable Income taxes payable Current portion of long-term debt Unearned revenue Cash and cash equivalents $325,000.00 $125,000.00 Marketable securities $180,000.00 $150,000.00 Accounts & notes receivable $420,000.00 $250,000.00 $125,000.00 Inventories $325,000.00 Prepaid expenses $150,000.00 Miscellaneous other payables $200,000.00 $925,000.00 Deferred taxes $75,000.00 Total current liabilities Miscellaneous current assets $75,000.00 $1,475,000.00 Total current assets Long-term debt Capital lease obligations Deferred taxes $3,100,000.00 $450,000.00 Plant, property & equipment $3,225,000.00 $150,000.00 Investment in affiliates $1,800,000.00 Total other liabilities $3,700,000.00 Other fixed assets $500,000.00 Total other assets $5,525,000.00 Owners' equity Preferred stock $1,450,000.00 Common stock $325,000.00 $375,000.00 Retained earnings Other equity items Total owners' equity $225,000.00 $2,325,000.00 Total assets $7,000,000.00…
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Lloyd Inc. has sales of $600,000, a net income of $36,000, and the following balance sheet: ROE will -Select- Cash Receivables Inventories by X $ 652,800 Long-term debt 367,200 Common equity $1,020,000 Total liabilities and equity 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. 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. percentage points. $ Total current assets Net fixed assets Total assets 70,380 Accounts payable 174,420 Notes payable to bank 408,000 Total current liabilities What will be the firm's new quick ratio? Do not round intermediate calculations. Round your answer…

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