What problems might Robert encounter in comparing these companies to one another on the basis of their ratios? (Select all the answers that apply.)

1. The four companies are in very different industries.

2. The operating characteristics of firms across different industries vary significantly resulting in very different ratio values.

3. Financial ratios from software companies are never very reliable.

4. Caution must be exercised when comparing older to newer firms, e.g., utility company vs. software company.

2. Robert Arias 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 each other. Some of his ratios are listed here: Island Burger Fink Roland Ratio Electric Utility Heaven Software Motors Current ratio 1.06 1.35 6.79 4.55 Quick ratio 0.92 0.87 5.23 3.73 Debt ratio 0.69 0.45 0.04 0.34 Net profit margin 6.25% 14.33% 28.46% 8.43% 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