1. Ratio Comparisons Robert Arias recently inherited a stock portfolio from his uncle. Wishing to learn more about the companies that he is now invested in, Robert performs a ratio analysis on each one and decides to compare them to each other. Some of his ratios are listed below. (Gitman - Principles of Managerial Finance - 10" Ed.) Island Electric Burger Fink Roland Ratio Utility Heaven Software Motors Current ratio 1.10 1.30 6.80 4.50 Quick ratio 0.90 0.82 5.20 3.70 Debt ratio 0.68 0.46 0 0.35 Net profit margin 6.2% 14.3% 28.5% 8.4% 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. Answer the following questions: a. What problems might Robert encounter in comparing these companies to one another on the basis of their ratios? b. Why might the current and quick ratios for the electric utility and the fast-food stock be so much lower than the same ratios for the other companies? c. Why might it 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? (Hint: Focus on risk and return) General Hint: In comparing the companies, focus on the nature of their businesses and the differences and similarities in their way of doing business (research on the nature of these kinds of businesses)