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Let us assume that a company begins with: Capital stock of 100. Cash of 100. At the beginning of the year, one item of inventory

Let us assume that a company begins with:

  • Capital stock of 100.
  • Cash of 100.
  • At the beginning of the year, one item of inventory is bought for 100.
  • The item of inventory is sold at the end of the year for 150, its replacement cost at that time is 120 and general inflation throughout the year is 10 per cent.
  • Profit measured using each of the capital maintenance concepts mentioned earlier would be as shown as follows:

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