Question
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
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.)
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.
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 outStep by Step Solution
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