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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CLEVELAND COMPRESSOR Balance Sheet December 31, 20X1 20X2 20X1 Assets $ 13,862 $ 16,339 23,887 25,778 54,867 43,287 $ 92,616 $ 85,404 101,543 99,615 34,331 31,957 $ 67,212 $ 67,658 1,914 1,791 13,052 13,138 $174,794 $167,991 Cash... Net accounts receivable Inventory Total current assets Fixed assets: Plant, property, and equipment .... Less: Accumulated depreciation... Net fixed assets Prepaid expenses Other assets Total assets