At the end of 2013, the following information is available for ABC Company and XYZ Company: Required:
1) For each company, calculate the debt to assets ratio and the return on equity ratio.
2) For each company, calculate the return on assets ratio.
3) Which company had a greater level of debt risk? Why?
4) What is financial leverage? Which company is using financial leverage more successfully?

Question

At the end of 2013, the following information is available for ABC Company and XYZ Company:  Required:
1) For each company, calculate the debt to assets ratio and the return on equity ratio.
2) For each company, calculate the return on assets ratio.
3) Which company had a greater level of debt risk? Why?
4) What is financial leverage? Which company is using financial leverage more successfully?

Quizplus · Accepted Answer

The Answer of At the end of 2013, the following information is available for ABC Company and XYZ Company:  Required:
1) For each company, calculate the debt to assets ratio and the return on equity ratio.
2) For each company, calculate the return on assets ratio.
3) Which company had a greater level of debt risk? Why?
4) What is financial leverage? Which company is using financial leverage more successfully?

At the End of 2013, the Following Information Is Available