At the end of 2016 the following information is available for the Alaska Company and the Colorado Company:

Required
a. For each company, compute the debt to assets ratio and the return on equity ratio.
b. Determine what percentage of each company€™s assets were financed by the owners.
c. Which company has the greatest level of financial risk?
d. Based on profitability alone, which company performed better?
e. Do the above ratios support the concept of financial leverage? Explain.

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Alaska Co. Colorado Co $245,000 $926,000 Total assets Total liabilities Stockholders' equity Net income 501,000 152,000 425.000 93,000 20,000 65,000