Questions 31 through 34 refer to Exhibit 1.

EXHIBIT 1 Common-Size Balance Sheets for Company A, Company B, and Sector Average

	Company A	Company B	Sector Average
ASSETS
Current assets
Cash and cash equivalents	5	5	7
Marketable securities	5	0	2
Accounts receivable, net	5	15	12
Inventories	15	20	16
Prepaid expenses	5	15	11
Total current assets	35	55	48
Property, plant, and equipment, net	40	35	37
Goodwill	25	0	8
Other assets	0	10	7
Total assets	100	100	100
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
Accounts payable	10	10	10
Short-term debt	25	10	15
Accrued expenses	0	5	3
Total current liabilities	35	25	28
Long-term debt	45	20	28
Other non-current liabilities	0	10	7
Total liabilities	80	55	63
Total shareholders equity	20	45	37
Total liabilities and shareholders equity	100	100	100

1. Based on Exhibit 1, the financial leverage ratio for Company B is closest to:
   1. 0.55.
   2. 1.22.
   3. 2.22.