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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
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 %
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