Why are ratios said to be mechanical and incomplete by themselves?

b) The following data relates to two companies’ annual reports

Company ABC Company XYZ

$ $

Total Current assets 7,683,200 1,900,000

Total Current liabilities 5,472,600 1,201,400

Total quick assets 3,766,600 918,600

Average Total assets 19,579,200 4,979,200

Average stockholders’ equity 6,563,400 2,001,600

Operating Income 2,270,800 485,800

Net Income 1,222,000 236,000

Required

1. Compute the following for each company (round computations to one decimal place). Show how each ratio is computed.

a. Current ratio

b. Quick ratio

c. Working Capital

d. Return on average total assets

e. Return on average total shareholders’ equity

2. From the viewpoint of a short-term creditor, which of these companies appears to have greater short-term debt paying capability? Explain