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You are analyzing the capital structure of two energy companies, EnergyCo and PowerCorp, to assess their financial risk. Requirements: EnergyCo has total liabilities of $800
You are analyzing the capital structure of two energy companies, EnergyCo and PowerCorp, to assess their financial risk.
Requirements:
- EnergyCo has total liabilities of $800 million and shareholders' equity of $1 billion as of December 31, 2023. PowerCorp has total liabilities of $600 million and shareholders' equity of $1.2 billion on the same date.
- Calculate the debt-to-equity ratio for both companies.
- Discuss which company appears to rely more on debt financing relative to its equity.
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