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Company Dreamworks Pixar Universal Expenses $ 29,000 121,000 30,000 Total Assets $ 145,000 168,000 104,000 Net...

Company Dreamworks Pixar Universal Expenses $ 29,000 121,000 30,000 Total Assets $ 145,000 168,000 104,000 Net Income \$55 81,000 8,600 Total Liabilities $ 135,200 150,600 54,600 a . Compute the debt ratio for each of the three companies . (Round your answers to 2 decimal places .) Debt Ratio Company Dreamworks Pixar Universal b. Which company has the most financial leverage ? Largest financial leverage

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Answer #1

Debt ratio=total debt/total assets

Comany dreamworks debt ratio =135200/145000

=0.93:1

Company pixer debt ratio=150600/168000

=0.90

Company universal debt ratio=54600/104000

=0.53

Financial leverage formula=total debt/shareholder equity

Shareholder equity=total assets-total debt

Company dreamwrk financial leverage=135200/145000-135200

=135200/9800=13.80

Company pixer financial leverage=150600/17400

=8.66

Company universal debt ratio=54600/49400=1.11

Company dreanwrk has highest financial leverage

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