Savelots Stores' Current Financial Statements Are Shown Below: a Recently

question 77

Multiple Choice

Savelots Stores' current financial statements are shown below: A recently released report indicates that Savelots' current ratio of 1.9 is in line with the industry average.However,its accounts payable,which have no interest cost and which are due entirely to purchases of inventories,amount to only 20% of inventory versus an industry average of 60%.Suppose Savelots took actions to increase its accounts payable to inventories ratio to the 60% industry average,but it (1) kept all of its assets at their present levels (that is,the asset side of the balance sheet remains constant) and (2) also held its current ratio constant at 1.9.Assume that Savelots' tax rate is 40%,that its cost of short-term debt is 10%,and that the change in payments will not affect operations.In addition,common equity would not change.With the changes,what would be Savelots' new ROE?

• A) 10.5%
• B) 7.8%
• C) 9.0%
• D) 13.2%
• E) 12.0%

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Definitions:

Ejaculation

The process of releasing semen from the penis during sexual climax.

Orgasm

The climax of sexual excitement, characterized by intense pleasure and release of built-up tensions.

Corpus Spongiosum

A spongy tissue surrounding the male urethra within the penis, engorging with blood during an erection to prevent the urethra from pinching closed.

Homologous

In biology, referring to organs, structures, or genes that derive from a common ancestor, sharing a similar position, structure, or evolutionary origin.