At the end of Year 1, the following information is available for ABC Company and XYZ Company:
Required:a)For each company, calculate the debt-to-assets ratio. (Show your work.)b)For each company, calculate the return-on-equity ratio. (Show your work.)c)For each company, calculate the return-on-assets ratio.d)Identify which company has a greater level of debt risk.e)Explain the meaning of financial leverage.f)Identify which company is using financial leverage more successfully and explain why.

Question

At the end of Year 1, the following information is available for ABC Company and XYZ Company:
  Required:a)For each company, calculate the debt-to-assets ratio. (Show your work.)b)For each company, calculate the return-on-equity ratio. (Show your work.)c)For each company, calculate the return-on-assets ratio.d)Identify which company has a greater level of debt risk.e)Explain the meaning of financial leverage.f)Identify which company is using financial leverage more successfully and explain why.

Quizplus · Accepted Answer

The Answer of At the end of Year 1, the following information is available for ABC Company and XYZ Company:
  Required:a)For each company, calculate the debt-to-assets ratio. (Show your work.)b)For each company, calculate the return-on-equity ratio. (Show your work.)c)For each company, calculate the return-on-assets ratio.d)Identify which company has a greater level of debt risk.e)Explain the meaning of financial leverage.f)Identify which company is using financial leverage more successfully and explain why.

At the End of Year 1, the Following Information Is