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Fact Scenario: Two companies that operate in the same industry as competitors are being evaluated...

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Finance

Fact Scenario: Two companies that operate in the same industry as competitors are being evaluated by a bank that can lend money to only one of them. Summary information from the financial statements of the two companies follows. Data from the current year-end balance sheets: Rich Poor Company Company Assets Cash $18,700 $33,000 Accounts Receivable 34,500 53,800 Notes receivable (trade) 8,500 6,000 Merchandise inventory 88,600 119,700 Prepaid expenses 4,200 6,200 Plant and equipment, net 284,100 288,600 Total assets $438,600 $507,300 Liabilities and Equity Current Liabilities $60,300 $94,700 Long-term notes payable 80,000 100,000 Common Shares (See Note) 175,000 180,000 Retained Earnings 123,300 132,600 Total liabilities and equity $438,600 $507,300 Data from

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