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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:

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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