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Current Assets

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Cleveland Compressor and Pnew York Pneumatic are competing manufacturing firms. Their financial statements are printed below.

a. How are the current assets of each firm financed?
b. Which firm has the larger investment in current assets? Why?
c. Which firm is more likely to incur carrying costs, and which is more likely to incur shortage costs? Why?

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The solution explains the calculations relating to current assets.

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a.The current assets of Cleveland Compressor are financed largely by retained earnings. From 20X1 to 20X2, total current assets grew by $7,212. Only $2,126 of this increase was financed by the growth of current liabilities. Pnew York Pneumatic's current assets are largely ...

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