5. More on debt management ratios The extent of financial leverage in a firm Debt ratios measure the proportion of total assets financed by a firm's creditors. Green Caterpillar Garden Supplies Inc. has a debt-to-equity ratio of 4.00, compared to the industry average of 3.20. Its competitor Peaceful Greens and Gardens, however, has a debt-to-equity ratio of 6.00. Based on what debt-to-equity ratios imply, which of the following statements is true? OPG&G's creditors face lesser risk than the average financial risk in the industry. OPG&G has higher creditworthiness as compared to Green Caterpillar. O Green Caterpillar's shareholders expect magnified returns but higher risk as compared to PG&G. O PG&G has greater financial risk as compared to Green Caterpillar and to the average financial risk in the industry. Suppose the stock price of Peaceful Greens and Gardens increases by 15%. What impact will it have on its market debt ratio if nothing changes in the company's balance sheet? O The market debt ratio will increase, reflecting decrease in the financial risk of the company. The market debt ratio will increase, reflecting an increase in the financial risk of the company. The market debt ratio will decrease, reflecting an increase in the financial risk of the company. The market debt ratio will decrease, reflecting a decrease in the financial risk of the company. Data Collected (Millions of dollars) Year 1 EBITDA $200 Interest payments $20 Principal payments $16 Lease payments $9 Peaceful Greens and Gardens reported the following figures in its annual report. Based on the information, Peaceful Greens and Gardens has the ability to cover its fixed financial charges times