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Ratio comparisons Robert Avias recently inhented a stock portfolio from his uncle. Wishing to leapn more about the companies in which he is now invested,
Ratio comparisons Robert Avias recently inhented a stock portfolio from his uncle. Wishing to leapn 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 diferences in these rabos confusing Help him out a. What probiems might Riobert 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 ubify 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 electro utily to carry a large areount of debt, but not the sofwere company? d. Why wouldent investors invest all of their money in software companies instead of in less proftable companies? (Focus on risk and retum) 2. What problems might Fobert encountec in comparing these companies to one another on the basis of ther ratios? (Select at the antwers that apply) a. Castion must be exercised when comparing older to newer frms, e g, utily company ve. software company. C. The four companies are in very different industres. D. Financial ratos trom sotware companies are never very reliable
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