Brief Exercise 3-6 (Algo) Calculating ratios using financial information LO 3-6 Assume the following two companies compete in the same industry. The following information was drawn from the financial statements of the two companies at the end of the year: Company Lolia Incorporated Totsie Company a. Return-on-Assets Ratio Effectiveness Assets 915,875 324,530 b. Debt-to-Assets Ratio Financial Risk Liabilities 600,875 79,530 Required: a. Compute the return-on-assets ratio for both companies. Based on these ratios, which company was more effective at using its assets to generate income? b. Compute the debt-to-assets ratio for both companies. Based on these ratios, which company has less financial risk? Note: For all requirements, round percentage answers to two decimals. Lolia Incorporated % Stockholders Equity 315,000 245,000 % Totsie Company % Net Income 216,600 68,475 %

Brief Exercise 3.6 (Algo) Calculating ratios using financial information LO 3.6 Assume the following two companies compete in the same industry. The following information was drawn from the financial statements of the two companies at the end of the year: Required: a. Compute the return-on-assets ratio for both companies. Based on these ratios, which company was more effective at using its assets to generate income? b. Compute the debt-to-assets ratio for both companies. Based on these ratios, which company has less financial risk? Note: For all requirements, round percentage answers to two decimals