Bob's Inc has the following balance sheet and income statement data see image...The new CFO thinks that inventory are excessive and could be lowered to cause the current ratio to equal industry average 3.00 w/o 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? Cash$14,000Accounts payable$42,000Receivables70,000Other current liabilities 28.000Inventories260,000Total CL$70,000$344,000 Long-term debtCommon equityTotal CA160,000260.000Net fixed assets 146,000Total assets$490,000 Total liab. and equity $490,000Sales$280,000Net income21,000The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause thecurrent ratio to equal the industry average. 3.00, 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.

Return on equity (ROE) seems to be a financial performance metric that is derived by dividing net…

Bob's Inc has the following balance sheet and income statement data see image... The new CFO thinks that inventory are excessive and could be lowered to cause the current ratio to equal industry average 3.00 w/o 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?

Bob's Inc has the following balance sheet and income statement data see image... The new CFO thinks that inventory are excessive and could be lowered to cause the current ratio to equal industry average 3.00 w/o 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?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 18MCQ

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