Which company uses more financial leverage

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Reference no: EM131313222

1. Consider two companies, each with a return on assets of 10%. Company X has a return on equity of 15%, and Company Y has a return on equity of 20%. Which company uses more financial leverage? Explain.

2. Construct the common size balance sheet for Grisham Company for 2009.

Balance Sheet (in millions)
Cash	$50	Current liabilities	$30
Accounts receivable	30	Long-term debt	90
Inventory	80	Equity	240
Plant and equipment	200
Total assets	$360	Total liabilities and equity	$360

Reference no: EM131313222

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