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Or Ratio comparisons Robert Arlas recently inherited a stock portfolio from his uncle, Wishing to learn more about the companies in which he is now invested, Robert performs a ratio analysis on each one and decides to compare them to one another. Some of his ratios are listed here. Assuming that his uncle was a wise investor who assembled the portfolio with care, Robert finds the wide differences in these ratios confusing. Help him out. a. Whum problems might Robert encounter in comparing these companies to one another on the basis of their ratios? b. Why might the current and quick tatios for the electric utility and the fast-food stock be so much lower than the same ratios for the other companies? c. Why might be all right for the electric utility to carry a large amount of debt, but not the software company? d. Why wouldn't investors invest all of their money in software companies instead of in less profitable companies? (Focus on risk and return.) a. What problems might Robert encounter in comparing these companies to one another on the basis of their ratlos? (Select all the answers that apply) A. The operating characteristics of from across different industries vary slgnificantly routing in very different ratlo values B. The four companies we in very different industria c. Calon must be exercised when comparire old to newer firma, Wility company was notrwate company D. Financiation from software companies we never wory rolable b. Why might the current and quick ration for the electric Willey and the font.food stock be so much lower than the same ration for the other companies? (Select all the answers that apply DA Their inventory balances are going to be very close to zero became it is possible to stockte octricity and burpert 03. The exponation for the lower curtera arid quick tonica monthly costs on the fact that the two Industries operate primary on a conta C. The accounts receivable Dolores are going to be much lower than for the other two companies Do. The explanation for the lower content and quick ratou most likely waters to poor management performance c. Whoy might be ovom for the electric unity to cury o Mirge amount of debt, but not me sotworo company (select all the answer that apply O stand to have a low tego an Tools Click to select your ) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Island Burger Fink Roland Electric Utility Ratio Heaven Motors Software 1.06 Current ratio 1.26 4.53 6.79 0.93 Quick ratio 0.85 5.16 3.68 Debt ratio 0.38 0.65 0.42 0.03 28.47% 8.43% ry 14.25% 6.18% Net profit margin tio nts Print Done patio all right for the electric utility to carry a large amount of debt, but not the software company? (Select all the answers that apply.) mnd to have steady cash flow requirements. our answer(s) Home Prison 56 F5 PII 9 8 % 5 7 6 a. What problems might Robert encounter in comparing these companies to one another on the basis of their ratios? (Select all the answers that apply) A. The operating characteristics of firms across different industries vary significantly resulting in very different ratio values. B. The four companies are in very different Industries. C. Caution must be exercised when comparing older to newer firms, c.9., utility company vs, software company D. Financial ratios from software companies are never very reliable b. Why might the current and quick ratios for the electric ulty and the fast-food stock be so much lower than the same ratlos for the other companies? (Select all the answers that apply.) A. Their inventory balances are going to be very close to zero because it is impounible to stockpile electricity and burgers, B. The explanation for the lower current and quick ratios most likely rest on the fact that those two industries operato primarily on a cash basin c. Their accounts receivable balonces are going to be much lower than for the other two companies D. The exploration for the lower current and quick ratios mout likely relates to poor management performance, Be c. Why might it be all right for the electric utility to carry a large amount of debt, but not the software company? (Select all the answers that apply) A. Utilities tend to have steady cash flow requirements. B. A high level of debt can be maintained if the firm has a large predictable and steady cash flow. C. The software industry is subject to greater competition resulting in more volatile cash flow, D. The software firm will have very uncertain and changing cash flow. d. Why wouldn't investors Invest all of their money in software companies instead of in less profitable componies? (Focus on risk and return.) (Select all the answers that apply.) DA. By placing all of the money in one stock, the benefits of reduced risk associated with diversification are out B. Software companies tend to carry large debt which represents senior claims on the companios sets C. Investors wouldn't invest all of their money in software companies because their average collection period is usually very high D. Although the software Industry has potentially high profits and investment return performance, it also has a targe amount of uncertainty associated with the profits ols Or Ratio comparisons Robert Arlas recently inherited a stock portfolio from his uncle, Wishing to learn more about the companies in which he is now invested, Robert performs a ratio analysis on each one and decides to compare them to one another. Some of his ratios are listed here. Assuming that his uncle was a wise investor who assembled the portfolio with care, Robert finds the wide differences in these ratios confusing. Help him out. a. Whum problems might Robert encounter in comparing these companies to one another on the basis of their ratios? b. Why might the current and quick tatios for the electric utility and the fast-food stock be so much lower than the same ratios for the other companies? c. Why might be all right for the electric utility to carry a large amount of debt, but not the software company? d. Why wouldn't investors invest all of their money in software companies instead of in less profitable companies? (Focus on risk and return.) a. What problems might Robert encounter in comparing these companies to one another on the basis of their ratlos? (Select all the answers that apply) A. The operating characteristics of from across different industries vary slgnificantly routing in very different ratlo values B. The four companies we in very different industria c. Calon must be exercised when comparire old to newer firma, Wility company was notrwate company D. Financiation from software companies we never wory rolable b. Why might the current and quick ration for the electric Willey and the font.food stock be so much lower than the same ration for the other companies? (Select all the answers that apply DA Their inventory balances are going to be very close to zero became it is possible to stockte octricity and burpert 03. The exponation for the lower curtera arid quick tonica monthly costs on the fact that the two Industries operate primary on a conta C. The accounts receivable Dolores are going to be much lower than for the other two companies Do. The explanation for the lower content and quick ratou most likely waters to poor management performance c. Whoy might be ovom for the electric unity to cury o Mirge amount of debt, but not me sotworo company (select all the answer that apply O stand to have a low tego an Tools Click to select your ) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Island Burger Fink Roland Electric Utility Ratio Heaven Motors Software 1.06 Current ratio 1.26 4.53 6.79 0.93 Quick ratio 0.85 5.16 3.68 Debt ratio 0.38 0.65 0.42 0.03 28.47% 8.43% ry 14.25% 6.18% Net profit margin tio nts Print Done patio all right for the electric utility to carry a large amount of debt, but not the software company? (Select all the answers that apply.) mnd to have steady cash flow requirements. our answer(s) Home Prison 56 F5 PII 9 8 % 5 7 6 a. What problems might Robert encounter in comparing these companies to one another on the basis of their ratios? (Select all the answers that apply) A. The operating characteristics of firms across different industries vary significantly resulting in very different ratio values. B. The four companies are in very different Industries. C. Caution must be exercised when comparing older to newer firms, c.9., utility company vs, software company D. Financial ratios from software companies are never very reliable b. Why might the current and quick ratios for the electric ulty and the fast-food stock be so much lower than the same ratlos for the other companies? (Select all the answers that apply.) A. Their inventory balances are going to be very close to zero because it is impounible to stockpile electricity and burgers, B. The explanation for the lower current and quick ratios most likely rest on the fact that those two industries operato primarily on a cash basin c. Their accounts receivable balonces are going to be much lower than for the other two companies D. The exploration for the lower current and quick ratios mout likely relates to poor management performance, Be c. Why might it be all right for the electric utility to carry a large amount of debt, but not the software company? (Select all the answers that apply) A. Utilities tend to have steady cash flow requirements. B. A high level of debt can be maintained if the firm has a large predictable and steady cash flow. C. The software industry is subject to greater competition resulting in more volatile cash flow, D. The software firm will have very uncertain and changing cash flow. d. Why wouldn't investors Invest all of their money in software companies instead of in less profitable componies? (Focus on risk and return.) (Select all the answers that apply.) DA. By placing all of the money in one stock, the benefits of reduced risk associated with diversification are out B. Software companies tend to carry large debt which represents senior claims on the companios sets C. Investors wouldn't invest all of their money in software companies because their average collection period is usually very high D. Although the software Industry has potentially high profits and investment return performance, it also has a targe amount of uncertainty associated with the profits ols

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