Question 22 Two companies MaxIncome and SafetyFirst, producing similar products have completely different short term financial management policies Financial statements for each of the companies are as follows MaxIncome SafetyFirst Balance Sheet Cash and Marketable Securities $6,598 $17,855 Accounts Receivable 15,125 25,632 Inventory 18,365 46,123 Net Long term Assets 48,306 48,306 Total Assets $88,394 $137,916 Short term Bank Loans $18,232 $5,362 Accounts Payable 18,185 11,565 Long term Debt 4,930 77,816 Common Stock 33,562 33,562 Retained Earnings 13,485 9,611 Total Liabilities and Equity $88,394 $137,916 Income Statement Sales $265,233 $302,555 COGS 162,900 177,930 General, Selling and Administrative Expenses 87,716 118,617 Net Income $8,770 $3,605 Calculate the current ratio , quick ratio , net working capital , and cash cycle for both firms Discuss the risk return tradeoff of a firm's working capital policy in terms of short term vs long term debt financing using these two companies as examples

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Question 22 Two companies: MaxIncome and SafetyFirst, producing similar products have completely different short-term financial management policies. Financial statements for each of the companies are

Question 22

Two companies: MaxIncome and SafetyFirst, producing similar products have completely different short-term financial management policies. Financial statements for each of the companies are as follows:

	MaxIncome	SafetyFirst
Balance Sheet
Cash and Marketable Securities	$6,598	$17,855
Accounts Receivable	15,125	25,632
Inventory	18,365	46,123
Net Long-term Assets	48,306	48,306
Total Assets	$88,394	$137,916
Short-term Bank Loans	$18,232	$5,362
Accounts Payable	18,185	11,565
Long-term Debt	4,930	77,816
Common Stock	33,562	33,562
Retained Earnings	13,485	9,611
Total Liabilities and Equity	$88,394	$137,916
Income Statement
Sales	$265,233	$302,555
COGS	162,900	177,930
General, Selling and Administrative Expenses	87,716	118,617
Net Income	$8,770	$3,605

Calculate the current ratio, quick ratio, net working capital, and cash cycle for both firms. Discuss the risk-return tradeoff of a firm's working capital policy in terms of short-term vs long-term debt financing using these two companies as examples.