Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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? (Select all the answers that apply.) (0.25 Marks) 1. Their inventory balances are going to be very close to zero because it is impossible to stockpile electricity and burgers. 2. The explanation for the lower current and quick ratios most likely relates to poor management performance. 3. Their accounts receivable balances are going to be much lower than for the other two companies. 4. The explanation for the lower current and quick ratios most likely rests on the fact that these two industries operate primarily on a cash basis. 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.) (0.25 Marks) 1. A high level of debt can be maintained if the firm has a large, predictable, and steady cash flow. 2. The software firm will have very uncertain and changing cash flow. 3. Utilities tend to have steady cash flow requirements
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started