103 CHAPTER 3 Financial Statements and Ratio Analysis Ratio comparisons Robert Arias recently inherited a stock portfolio from his uncle. Wishing to learn more about the companies in which he is now invested, Robert per- forms a ratio analysis on each one and decides to compare them to one another Some of his ratios are listed below. 12 Island Burger Fink Roland Electric Utility Heaven Software Motors Ratio Current ratio Quick ratio Debt ratio Net profit margin 1.10 0.90 0.68 6.2% 6.8 0.82 5.2 3.7 0.46 0.0 0.35 14.3% 28.5% 8.4% 4.5 Assuming that his uncle was a wise investor who assembled the portfolio with care, a. What problems might Robert encounter in comparing these companies to one -b. Why might the current and quick ratios for the electric utility and the fast-food Robert finds the wide differences in these ratios confusing. Help him out. another on the basis of their ratios?D fere nduot es ess stock be so much lower than the same ratios for the other companies? Why might it be all right for the electric utility to carry a large amount of debt, but not the software company? Sofuoase (dushmy has re-ComfeHti e d. Why wouldn't investors invest all their money in software companies instead of in less profitable companies? (Focus on risk and return.) Liquidity management Bauman Company's total current assets, total current liabili- 103 CHAPTER 3 Financial Statements and Ratio Analysis Ratio comparisons Robert Arias recently inherited a stock portfolio from his uncle. Wishing to learn more about the companies in which he is now invested, Robert per- forms a ratio analysis on each one and decides to compare them to one another Some of his ratios are listed below. 12 Island Burger Fink Roland Electric Utility Heaven Software Motors Ratio Current ratio Quick ratio Debt ratio Net profit margin 1.10 0.90 0.68 6.2% 6.8 0.82 5.2 3.7 0.46 0.0 0.35 14.3% 28.5% 8.4% 4.5 Assuming that his uncle was a wise investor who assembled the portfolio with care, a. What problems might Robert encounter in comparing these companies to one -b. Why might the current and quick ratios for the electric utility and the fast-food Robert finds the wide differences in these ratios confusing. Help him out. another on the basis of their ratios?D fere nduot es ess stock be so much lower than the same ratios for the other companies? Why might it be all right for the electric utility to carry a large amount of debt, but not the software company? Sofuoase (dushmy has re-ComfeHti e d. Why wouldn't investors invest all their money in software companies instead of in less profitable companies? (Focus on risk and return.) Liquidity management Bauman Company's total current assets, total current liabili